Nike posts $11B quarter and plans for 30 new stores
By Cara Salpini
Published Dec. 21, 2020
Just weeks after Lululemon reported revenue that surged 22%, Nike announced an $11.2 billion quarter, up 9% from the previous year. The activewear retailer saw 84% growth in digital, its third straight quarter of roughly 80% growth in that metric, CEO John Donahoe said on a conference call with analysts.
The retailer is not backing off of physical growth, though. Nike opened two Nike Live stores and six Nike Unite stores in the second quarter, and plans to open 30 stores in the second half of the year, Chief Financial Officer Matt Friend said.
Nike Direct sales were up 32% to $4.3 billion, mostly thanks to the digital gains, while by brand, Nike's revenues were $10.7 billion (up 8%) and $476 million for Converse (down 4%), according to a company press release. Net income at the retailer rose 12% to $1.3 billion.
While most retailers are playing catch up, Nike plans to capitalize on its quick recovery to drive further investments.
Core areas of focus for growth investment are women's, apparel, digital and the Jordan brand, executives said on the call. In apparel, the company's maternity line, which launched in September, saw a 100% sellthrough of tights in its first two days. The retailer also expanded its extended sizing into the kids category this quarter.
Inventory is back to healthy levels "through intentional supply and demand management actions," Friend said, though gross margin decreased 90 basis points to 43.1% through efforts to reduce excess inventory.
Nike Digital now makes up 25% of the North America business and the Nike mobile app grew 200% in the quarter, according to executives. Donahoe added that the retailer has added 70 million new Nike members globally since the pandemic began and that buying member growth is outpacing new and active member growth.
Executives were full-steam ahead on the retailer's Nike Direct strategy, which calls for a focus on direct channels like Nike-owned stores and digital over wholesale partners (the retailer has already dropped some, according to Susquehanna Financial Group). The retailer also plans to open between 150 and 200 small-format stores in North America due to the strategy and is focusing its footprint on technology-driven concepts like Nike Live and Nike Rise.
"We're investing in technology in the supply chain so that we can better predict where to put inventory, where we think consumers want the inventory — and the benefits for us in that are in gross margin," Friend said, adding that the retailer is creating online to offline capabilities, like buy online, pick up in-store throughout its network. "While we don't have the largest store footprint today relative to maybe pure vertical retailers, we are investing in stores with the intentionality of having stores in more places with [online to offline] capabilities."
As has become the story with Nike, wholesale was not the company's central focus. Revenues in wholesale were down 14%, with the company reducing its undifferentiated retail partners in North America by 30% over the past three years, Telsey Advisory Group analysts said in emailed comments. Wholesale has taken a backseat in Nike's strategy, and the plan has also led to layoffs at the retailer's headquarters.