Nike Grows Sales 5%, Sticks With Amazon, Adds Stitch Fix
The brand’s apparel business held its own in the U.S., with sales flat at $1.28 billion for the second quarter.
Nike Inc. is stretching out in terms of digital distribution as its North American business sags, extending the firm’s pilot with Amazon and testing with styling service Stitch Fix Inc. for spring.
“While the athletic marketplace continues to shift, we’re very confident in the factors of our business that we control,” said Mark Parker, chairman, president and chief executive officer, on a conference call going over second-quarter results.
Parker said the company is implementing its “Consumer Direct Offense” and “identifying which consumer opportunities have the most upside and we’re over indexing in those areas to fuel growth.”
A big part of that is, as the ceo said, “unleashing a relentless flow of innovation at a scale that our industry has never seen.” But it also means making sure Nike is properly presented and represented on new platforms.\
Parker said: “This spring in the U.S., we’ll run a pilot with Stitch Fix the online personal styling service to bring personalized women’s product to their expansive audience and we’re extending our pilot with Amazon. It’s going well and we remain focused on learning and elevating the consumer experience.” (Amazon has long had Nike products from third-party sellers, but the brand agreed in the summer to work directly with the e-commerce giant to ensure its brand was positioned properly.)
Pressed by analysts about the Amazon connection on the call, Parker said: “We’ve seen good sell-through on the limited selection of products that we have offered. We are extending the small pilot.…We know when this operates at the highest level that there’s a great opportunity between Nike and Amazon to serve the consumer in ways that are mutually beneficial to both Amazon and Nike. We’re bullish on where this can go from here. I think the important part is that we advanced the brand through better presentation and then the sharing of data so we can better serve consumers. I think that’s really what we’re driving for behind the Amazon relationship. And frankly, any digital platform relationship we have.”
Nike’s tie-in with Amazon is just one of many moving parts at the company, which is seeing its home market weigh on its overall business and is working to make sweeping changes to its approach.
The company’s profits for the quarter fell 9 percent to $767 million, or 46 cents a diluted share, from $842 million, or 50 cents, a year earlier. The company attributed the decline to a decline in gross margins and higher selling and administrative costs, the impact of which was blunted by better sales and lower taxes.
Revenues for the quarter ended Nov. 30 rose 5 percent to $8.55 billion from $8.18 billion.
Nike’s North American business saw its overall sales fall 5 percent to $3.49 billion, but the apparel business held its own and was flat for the quarter with sales of $1.28 billion. The firm had signaled in October that it would fine-tune its distribution and move away from “undifferentiated” retailers.
Globally, the company’s Nike-branded apparel business grew 9 percent to $2.79 billion, while the brand’s footwear sales increased 4 percent to $5.03 billion.
Nike is looking to keep growing through focus, investing in key opportunities in 12 cities and 10 countries.
“It is through the execution of the category offense that we drive brand heat and distinction which in turn leads to growth in the marketplace,” said Trevor Edwards, president of the Nike brand.
And that offense includes a big push in women’s, which Edwards described as “a huge opportunity.”
“We continued to evolve and invest in our women’s business from concept to consumers, with increased resources focused on serving her in the right way,” Edwards said. “And as always, it starts with innovation. We’re driving that new innovation in the most important areas of her workout from bras to pants to tights. While already the number-one brand for performance bras globally, we expect to quadruple this business over the next five years. We’re also number one globally in pants and tights and we see more growth ahead as we introduce new styles across statement and core.”
The stock’s seen a big run up lately, from nearly $50 a share in October to a close at $64.77 Thursday. But investors didn’t see anything to make them push the stock higher in the late-day report and shares of Nike slipped 1 percent to $65.25 in after-hours trading.