(Bloomberg)—Nike Inc. will extend its pilot program with Amazon.com Inc. and will work with online personal styling service Stitch Fix in the spring.
Nike’s pilot for selling products on the website of Amazon, No. 1 in the Internet Retailer 2017 Top 500, is “going well” and will be extended, CEO Mark Parker said on a conference call Thursday when Nike reported its second quarter earnings for fiscal 2018. “We’ve seen good sell-through on the limited selection of products that we have offered,” he said.
Nike in the spring said it would begin selling on Amazon with a small assortment of footwear, apparel and accessories with an eye to “elevate how the Nike brand is presented on the Amazon platform,” Parker said in June a conference call, transcribed by SeekingAlpha, for results of fiscal 2017 ended May 31.
The company will also do a test run on Stitch Fix Inc. (No. 134), the online styling service that curates apparel items for consumers based on their preferences.
In fiscal Q2 ended Nov. 30, Nike (No. 37) struggled in North America, even as it made gains in most other regions.
The world’s largest sports brand posted quarterly sales that fell short of estimates in its home market, while beating them in Greater China and Europe, the Middle East and Africa. Nike does not break out online sales, but Nike Brand president Trevor Edwards said revenue for Nike Direct increased 15%, driven by online growth of 29%, comparable store growth of 6% and new stores.
The fiscal Q2 2018 results show that Nike still faces a challenge in regaining its footing in the U.S., where several retail partners have faltered and rival Adidas AG (No. 52) has been taking market share. The company succeeded, however, in beating estimates for revenue and has downplayed concerns over its North America results.
“It looks like a tale of two cities,” said Chen Grazutis, an analyst for Bloomberg Intelligence. “International is very strong, and the U.S. is still weaker than a lot of people expected.”
In China, digital growth is coming through Nike.com and Tmall, Alibaba Group Holdings’ online marketplace. “This quarter we also had Singles’ Day, which offered even more proof of our growth strategy,” Edwards said. “On the biggest shopping day in the fastest growing geography, we set records as Nike emerged as the No. 1 overall brand for both footwear and apparel.”
CEO Parker said, “I met recently with Alibaba’s CEO, Daniel Zhang, a few weeks ago and we’re incorporating our brands on their platforms in ways that benefit both companies, and I think that’s, again, that’s the real opportunity we see with Amazon, as well as we move forward. We’re learning a lot and we’re bullish on our ability to extend that relationship, and continue to grow.”
Parker said there was “underlying momentum” in the company’s domestic business during the quarter ending Nov. 30, and the lineup of new products for the next six months is “as strong as it’s ever been.”
The decline in North America marked the second straight. Nike has said it would improve results in its largest market by selling to fewer retailers, and instead do more business with chains, like Foot Locker Inc. (No. 53), that focus on athletic gear.
Nike shares fell to as low as $62.62 in early trading on Friday. The stock has gained 27% in 2017 through Thursday’s close.
One bright spot is that Nike’s gross margin narrowed less than expected, even though several of its retail partners have reported a very promotional shopping environment.
Profit of 46 cents a share beat the average analyst estimate of 40 cents and was boosted by a lower tax rate, while revenue of $8.55 billion outpaced the estimate of $8.39 billion. Gross margins were 43%, compared with the expected 42.5%.
For the quarter ended Nov. 30, Nike also reported:
- Revenue of $554 billion, up 4.6% from $8.180 billion a year ago.
- Net income of $767 million compared with $842 million.
For the first six months of fiscal 2018, Nike reported:
- Revenue of $17.624 billion, up 2.2% from $17.241 billion in the year-ago period.
- Net income of $1.717 billion compared with $2.091 billion.