Beaverton, OR-based Nike reported second quarter earnings on Dec. 19. Below, we break out the takeaways that matter.
Nike continues to make technology investments to fortify the brand’s relationship with consumers worldwide, as well as divestitures to focus on growth in key segments — Jordan Brand, Converse, and running to name three. The objective to generate 80-plus percent of incremental revenue growth from 12 cities across 10 countries has grown legs over the last two fiscal years. With the company selling off its Hurley surf-inspired label in December, NKE appears more committed to developing its Converse brand, which realized quarterly double-digit topline growth in Europe and Asia.
2. Technological Investments = Better Inventory Management, Efficiency
Recent acquisitions of Celect and Zodiac will help Nike worldwide to predict the proper supply of products down to style, color and size, and generate stronger full-price sell-throughs, more efficient markdowns and fewer days in inventory for all products.
The Swoosh’s home market wasn’t as strong as other global regions in Q3, but still respectable with 8 percent growth in footwear to more than $2.4 billion and a 5 percent overall topline increase. Apparel sales were only 1 percent higher at nearly $1.42 billion. As it continues to “intentionally right size undifferentiated dimensions” in the marketplace with its key wholesale partners in Foot Locker, JD/Finish Line and Dick’s, Nike says the apparel growth rate was hampered by a tough (+10 percent) year-ago comparison. The brand has piloted “High Heat” apparel launch on the SNKRS app and says it’s realizing strong sell-through of apparel collections co-designed with SNKRS.
It’s not going away. Digital commerce sales grew 38 percent during period, fueled in part by 70+ percent growth in North America on Black Friday. Nike+ added three million members in Q2. The company says it’s changing the experience of finding a product and how it is delivered. Members can reserve item online and have it waiting at nearby store for try-on. RFID investments will allow Nike customers to track down a product in the same store, online or potentially at another retail partner of the brand. New CEO John Donahoe, with Mark Parker moving to Executive Chairman, should keep the company’s digital motivation humming.
Both performance and lifestyle will receive more attention in 2020, particularly with the Tokyo Olympics from July 24-Aug. 9, with new sportswear products introduced ahead of the global event. This month, the Infinity React Run, a style blending responsiveness, comfort and impact reduction, debuts. A new Zoom Air running platform across performance and lifestyle will debut before the Games. Nike is also promising to deliver more “core price point” running silhouettes this year, including the Renew concept, new styles under the Air Max platform and more unique women’s styles.
The Converse brand’s sales grew 15 percent in Q2 to $480 million, driven by double-digit expansion in Europe and Asia. Nike is promising to differentiate the brand’s product line beyond the Chuck by creating new opportunities in basketball, possibly running and apparel. Already, the Chuck 70, a premium version of the traditional Chuck, has generated double- and triple-digit growth in select regions. Strong digital growth across the region gives Nike optimism for the brand in North America.