Nike Inc., No. 24 in the 2020 Digital Commerce 360 Top 500, posted far better revenue than predicted, a sign it’s swiftly bouncing back from the pandemic slump.
For the first fiscal quarter of 2021 ended Aug. 31, Nike reported revenue of $10.59 billion, down 1% from the year-ago period. Its digital sales, however, grew 83%, driving nearly $900 million of incremental revenue versus the prior year, CEO John Donahoe said on an earnings call transcribed by SeekingAlpha. Online sales now make up 30% of Nike’s overall business, Donahoe said.
Nike also experienced triple-digit growth in new members in its Nike commerce app. “This is significant for us, as it speaks to the increasing consumer adoption of our apps,” Donahoe said.
Investors had been looking for evidence that Nike is navigating the coronavirus crisis, and that’s just what the company delivered. It had raised concerns the previous quarter, when falling sales led to a surprise loss and hurt margins. Now its turnaround appears to be solidly in motion, especially in China and via ecommerce.
Donahoe said, “no one can match our pace” of pumping out new products, which has kept up despite disruptions from the health crisis. “We’re getting stronger in the places that matter most,” he said. “We can thrive in this environment.”
The sportswear retailer and manufacturer also strengthened its fulfillment operations with the coronavirus in mind. It has added more robotics and automation in its logistics operations, “accelerating digital throughout and cutting order cycle times by up to 50%,” Donahoe said. “This allowed our teams to serve higher levels of digital demand with greater efficiency and precision.”
Nike also improved its margins more than expected, and direct sales rose 12% to $3.7 billion, Donahoe said. Nike expects revenue growth to range from the high single digits to the low double digits this fiscal year, with gross margins staying flat. Executives said full-price sales won’t see sequential improvement until the second half of the year.
Nike has stepped up efforts to sell more merchandise directly to consumers—an initiative that has led to job cuts. Relying less on outside retailers stands to benefit the Beaverton, Oregon-based company both during the recovery from COVID-19 and in the long run. Bricks-and-mortar stores, especially ones in malls, were some of the hardest hit by the coronavirus.
Sales for Nike in China were up 6% to $1.78 billion for the fiscal first quarter from $1.68 billion. Nike says retail traffic is recovering there better than anywhere else, reaching prior-year levels. But digital sales are the winner in China, up 30% year over year.
In its fiscal Q1, Nike opened its new store in Guangzhou, China, and is already seeing positive results. “We are already seeing member checkout in our Guangzhou store significantly outpace the rest of the fleet,” Donahoe said. “This is just one reflection of how digitally enabled our future of retail is and how membership is a critical differentiator.”
Nike still has excess inventory to handle. Inventory levels are up 15% compared with last year, due to temporary store closures and fewer wholesale shipments to retailers.
For the fiscal first quarter, Nike reported:
- Revenue for Nike Inc. decreased 1% to $10.59 billion compared with $10.66 billion a year ago.
- Gross profit declined 3% to $4.74 billion from $4.87 billion a year ago.
- Net income was $1.51 billion, up 11% from $1.37 a year ago.