Nike Inc. posted a loss and disappointing retail sales in the fiscal fourth quarter ended May 31, 2020—a sign that shuttered retail stores across the U.S. and much of the world took an even bigger toll than expected.
Revenue declined 38.0% to $6.31 billion in the period, well short of the $7.38 billion estimated by analysts. However, like many brands and retailers, it invested in online platforms to make up for stores being closed. Its online sales increased 75% in the fourth quarter and were approximately 30% of total revenue, Nike reported. Digital sales reached $5.5 billion for the full year.
More mobile orders for Nike
Nike’s mobile apps were getting a workout during the quarter. Consumer use of its app workouts more than tripled, peaking in April at nearly 5 million workouts per week during the month. And since February, the Nike ecommerce app has been downloaded more than 8 million times, Nike reported. The Nike app now represents 30% of its North American digital sales. In its fiscal third quarter, the Nike app grew its revenue close to triple digits, fueled by member acquisition and strong monthly engagement. Its app sales grew more than 60% during the quarter, the retailer reported.
On its earnings call, CEO John Donahoe announced a new digitally focused strategy. The “strategy leads with Nike digital in our own stores and embraces a small number of strategic partners who share our vision to provide a consistent premium shopping experience,” he said on the call transcribed by Seeking Alpha. “Connected data, inventory and membership will give consumers greater access to the best of Nike with more speed and convenience than ever.”
However, the results marked an about-face from earlier this year, when Nike beat Wall Street’s expectations in fiscal Q3 even as many consumer brands struggled. The company made the case to investors that it was prepared to deal with COVID-19 because of its experience operating in China during the initial breakout of the coronavirus.
Nike reopens (most) stores globally
In a bid to ease fears about a prolonged slump, the company said about 90% of stores that it runs globally are currently open, with 100% reopen in China. The athletic apparel retailer also said sales for this fiscal year, which runs through next May, would rebound in the second half to be little changed or possibly posting a gain.
But shipments to Nike’s wholesale customers were down almost 50%, hurting sales and leaving the company with excess inventory. It reported the lowest level of wholesale revenue since 2013.
Nike’s gross margin sank 8.2 percentage points to 37.3%, trailing analysts’ projections of 43.5%. That was its worst performance since 1998, according to data analyzed by Bloomberg. The big hit came from higher costs tied to order cancellations and other supply chain disruptions.
The company faces an uncertain future as the coronavirus continues accelerating in many parts of the U.S.
“Our current focus is to reduce discretionary spending while we invest in the digital capabilities necessary to further our competitive advantage in the marketplace,” Donahoe said. “This includes improving the user experience on our digital platforms through enhanced digital commerce analytics, marketing technology for better consumer targeting and segmentation, online-to-offline marketplace capabilities and enhanced inventory pricing and supply management tools. We will continue to increase the scale and efficiency of our digital fulfillment capabilities.”
Nike earnings summary
For the fiscal fourth quarter ended May 31, 2020, Nike reported:
- Revenue was $6.31 billion, down 38.0% compared with $10.18 billion in the same period last year.
- Digital sales increased 75% for the fiscal fourth quarter.
- Net loss of $790 million, down 180% compared with the same period last year.
For the full year ended May 31, 2020, Nike reported:
- Revenue fell 4.4% to $37.40 billion, compared with $39.12 billion in fiscal 2019, due to the impact of COVID-19 mainly in the fourth quarter.
- In fiscal 2020, digital sales increased 47% and reached $5.5 billion.
- Net income was $2.54 billion, down 36.9% from $4.03 billion in fiscal 2019, driven by lower revenue and gross margin due to COVID-19 in the fourth quarter, as well as higher selling and administrative expenses.
Nike is No. 24 in the 2020 Digital Commerce 360 Top 500.Favorite