The footwear retailer increased overall revenue 5.1% for its fiscal third quarter, but it has not yet felt the full impact of the coronavirus on its sales. However, Nike remains optimistic as its online sales over the last few days are approaching holiday peak levels.

Nike Inc.’s digital sales soared as much as 36% after online-order growth helped its overall revenue vault to $10.10 billion in its fiscal third quarter ended Feb. 29. Its overall revenue increased 5.1% for the fiscal third quarter, up from $9.61 billion year over year. It did not break out exact ecommerce figures.

The footwear retailer and manufacturer says it is well aware that this time period does not reflect the full impact the coronavirus will have on its sales, but it remains optimistic as people turn to digital devices. By driving a “strong digital marketing campaign,” Nike ecommerce “remains open and in growth mode,” CEO John Donahoe said on an earnings call transcribed by Seeking Alpha.

In addition, digital represents more than 20% of its overall business, Donahoe said, with apps as “the sharp point” of its growth. The Nike app grew its revenue close to triple digits in Q3, fueled by member acquisition and strong monthly engagement. Its app sales grew more than 60% during the quarter, he said.

“We’re increasingly concentrating on our online-to-offline journey… while creating frictionless experiences for consumers throughout the world,” Donahue said.

Digital overcomes the coronavirus

Since the end of the third fiscal quarter, hundreds of millions of consumers in Europe and the U.S. are now living under various forms of lockdowns. Nike says it may have an opportunity to accelerate its conversion of customers to digital customers from bricks-and-mortar shoppers.

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“Amidst unprecedented conditions across the globe, we are staying focused on not simply managing through this situation, but taking the actions that will allow us to emerge from it even stronger than before,” Donahoe said. “We know it won’t be easy, but Nike is better prepared than anyone else to regain that momentum, extend our brand leadership and reshape the future marketplace.”

Online sales for Nike over the last few days are approaching holiday peak levels, while also growing “triple digits” over the last week, chief financial officer Andy Campion said on the earnings call.

With the peak in sales, Nike says it has maintained operations in its distribution centers, focusing on digital order shipments while implementing social distancing and operating with reduced staff. The retailer did not say whether a reduced staff in distribution centers impacts its shipping time at all.

“Nike’s digital prowess and ability to manage through the virus in China is likely a good proxy for how the recovery will take shape in North America,” says analyst Sam Poser for investment firm Susquehanna International Group. “Brand strength, digital prowess… position the company to emerge from this crisis even stronger than before it went in.”

An optimistic look at the future

Nike, No. 33 in the 2019 Digital Commerce 360 Top 1000, opted not to provide guidance for its current quarter due to uncertainty around the coronavirus—perhaps so it wouldn’t have to scrap its forecast as Target Corp.(No. 16) did this week.

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Nike anticipates that each geographical region will go through four phases of dealing with the coronavirus, Donahoe said. In the first stage, which Nike calls containment, a country partially shuts down and stores close to stem the spread of the virus, leaving brands like Nike to rely heavily on digital sales. Second is recovery, when bricks-and-mortar stores slowly begin to reopen. That’s followed by a return to normalcy, when store traffic and in-person shopping hits pre-virus levels. And the last phase is a return to full growth for Nike, Donahoe said.

In China, for example, containment lasted five to six weeks, but 80% of its 7,000 bricks-and-mortar Nike-owned and partner stores are now open, Campion said.

The country is now through recovery and beginning its return to normalcy, Donahoe said. He expects Nike’s China sales to be flat next quarter, then return to growth in early next year. “In the U.S., we’re earlier in the cycle,” he said.

In China, “at a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike expert trainer network,” Donahoe said. This resulted in an “extraordinary rise” in sign-ups and engagement for Nike Training Club workouts in China; plus, weekly active users for all of its Nike activity apps were up 80% by the end of the quarter versus the beginning of the quarter, he said.

Plus, Nike found that in China, digital sales increased as the stores started reopening. Donahoe said that bolstered the company’s belief that ecommerce and physical locations enhance each other.

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Campion said Nike is also implementing this strategy in Japan and Korea. “Both markets are entering the normalization phase, fueled by strong digital growth and significant week-over-week increases in retail traffic and demand for Nike,” he said. “Based on what we’re experiencing in China, Korea and Japan, we are optimistic.”

As the coronavirus rages on, Nike is “working to create shared experiences and opportunity for virtual participation, connecting people to something bigger and showing how sport can inspire,” Donahue said.

Nike also is fighting the virus on another front. The retailer is exploring protective equipment for doctors and nurses, Donahoe said, prototyping face shields with Oregon Health and Science University. “This is a moment in society where the private sector has a major role to play,” he said. “Companies like Nike need to do our part.”

For the fiscal third quarter ended Feb. 29, Nike reported:

  • Total revenue for the three-month period was $10.10 billion, up 5.1% from $9.61 billion in the same period a year ago.
  • Revenue for the Nike brand was $9.61 billion, up 5.1% from $9.15 billion a year ago, which Nike says was driven by double-digit growth in Nike direct and growth in wholesale.
  • Revenue for Converse was $506 million, up 9.3% from $463 million a year ago. Nike says this growth was mainly driven by double-digit growth in Europe and global digital growth.
  • Net income decreased 23.0% to $847 million, down from $1.10 billion during the same period a year ago.

For the nine months ended Feb. 29, Nike reported:

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  • Total revenue for the nine-month period was $31.09 billion, up 7.5% from $28.93 billion in the same period a year ago.
  • Revenue for the Nike brand was $29.56 billion, up 7.5% from $27.51 billion the same period a year ago.
  • Revenue for Converse was $1.54 billion, up 9.2% from $1.41 billion in the same period a year ago.
  • Net income increased 9.2% to $3.32 billion, up from $3.04 billion during the same period a year ago.

Bloomberg contributed to this report.

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