In Sales Surprise, Nike Slips
Bottlenecks in its supply chain caught up with Nike, which posted an unexpected decline in quarterly sales. But profits came in stronger than forecast, and its direct-to-consumer offers continue to boom. And company executives say its innovations in marketing, personalization and retail formats can drive stronger results in the year ahead.
The Beaverton, Oregon-based company says sales fell 1%, in currency-neutral terms, to $10.4 billion. But North American revenues dropped 10%, a decrease it chalked up to congested U.S. ports and global shortages of shipping containers. Its Nike Direct sales climbed 16% to $4 billion, while digital sales soared 54%.
At Converse, sales climbed 8% to $570 million, powered by strong digital demand.
While its results in Europe suffered from COVID-19 closures, China continues to pour on gains, with revenues in that country leaping 42%.
Revenues came in below Wall Street expectations. But profits beat predictions, with net income climbing 71% to $1.4 billion.
Nike’s ever-evolving physical stores continue to be a key part of its strategy, creating “incremental market opportunity,” says Matt Friend, its chief financial officer, in remarks prepared for investors. “New retail concepts, such as Live, Rise and Unite, will create distinctive, authentic and premium Nike consumer experiences in the marketplace.” Besides recapturing displaced consumer demand, stores “will accelerate Nike digital growth by scaling online to offline capabilities as our physical presence reaches a greater number of consumers.”
Friend is also bullish on the company’s recent acquisition of Datalogue, a data integration platform, to increase its marketing impact.
“We are also continuing to test and learn within our full-funnel digital marketing activities,” he says, and in North America, using “leveraged data to identify consumer cohorts and feature personalized product recommendations.” He expects those efforts to lead to increased buying frequency, basket size and member retention rates.
Observers predict Nike will sort out its supply-chain hiccups in fairly short order.
While the numbers headline “proved messier than expected,” writes Brian Nagel, who follows Nike for Oppenheimer, “we believe underlying data suggest clearly that consumer demand for the company’s products remains strong and the Nike business model continues to develop and flex well.”
Global pandemic recovery trends are still somewhat uncertain, but Nagel continues to see Nike as one of the best-positioned large companies to “perform well as COVID-19 headwinds gradually abate.”
Its robust digital growth and solid demand in women’s and Jordan are also positives, writes Jonathan Komp, who follows Nike for Baird.
Women’s sales have over-indexed for growth for the last eight quarters, while Jordan sales have grown in the double-digits for the previous three, Komp says.
Credit: Media Post