Nike reports 36 percent digital growth amid COVID-19 outbreak
Prachi Singh| Wednesday, March 25 2020
Nike revenues increased to 10.1 billion dollars in the third quarter, up 5 percent on a reported basis and up 7 percent on a currency-neutral basis, driven by 13 percent currency-neutral growth in Nike Direct with digital growth of 36 percent and strong growth across EMEA, APLA and North America, offset by the impact of COVID-19 on the company’s business in Greater China. The company’s net income decreased 23 percent to 847 million dollars and diluted earnings per share decreased 22 percent to 53 cents as strong revenue growth in Nike Direct and across EMEA, APLA and North America was offset primarily by the non-recurring charge and the impacts to Greater China from COVID-19.
“In an extraordinarily dynamic time, Nike’s strong results are testament to our deep consumer connections, compelling product innovation and agile teams around the world. We know it’s in times like these that strong brands get even stronger,” said John Donahoe, President and CEO, Nike, Inc.
Nike updates on COVID-19 and business in China
The company said in a statement that digital sales in Greater China increased more than 30 percent while brick and mortar retail sales were impacted by temporary store closures related to COVID-19. Nike added that on a currency-neutral basis, Greater China revenues were down 4 percent following 22 consecutive quarters of double-digit growth. However, during the first two months of the third quarter, Greater China’s revenue grew strong double digits, offset by the impacts of COVID-19 beginning in late January.
At the peak in February, roughly 75 percent of Nike-owned and partner doors in Greater China were closed with others operating on reduced hours. Currently, nearly 80 percent of doors are open in Greater China with an even higher rate in key cities. Beginning March 16th, all Nike-owned stores, outside of Greater China, Japan and Korea were closed to help curb the spread of COVID-19.
Revenues for the Nike brand were 9.6 billion dollars, up 6 percent on a currency-neutral basis driven by double-digit growth in Nike Direct and growth in wholesale; key categories including sportswear and the Jordan Brand, and continued growth across footwear and apparel. Revenues for Converse were 506 million dollars, up 11 percent on a currency-neutral basis, mainly driven by double-digit growth in Europe and in digital, globally.
The company further said, gross margin decreased 80 basis points to 44.3 percent as a result of impacts from COVID-19, including a lower mix of sales in Greater China which is our highest margin geography, as well as increased rebates to wholesale partners and higher costs related to factory cancellations to manage future inventory. Gross margin also declined due to changes in foreign exchange rates and incremental tariffs in North America.