In an increasingly digital, inside world prompted by the global spread of COVID-19, Nike senior executives say the company has formulated a strategy out of its business experience with the pandemic in China. With 80 percent of its 7,000 owned and partner stores in China open again and the Asian market projected to generate “roughly flat” revenues in the current quarter ending May 31, Nike says it learnings focus on four areas: a containment period; a time of recovery, when retail traffic begins to return to stores; a normalization period; and a return to growth.
“Our experience in Asia, including Japan and South Korea, gives us confidence that we will see the other side of this crisis in the near future,” Nike president and CEO John Donahoe, presiding over his first earnings call for the company, told analysts last night.
Nike senior executives expect the next several weeks across Europe and the U.S. to be challenging ahead of the playbook’s second phase. In the meantime, faced with a shutdown of all global sports activity that includes the postponement of the Tokyo Games in late July, Nike is ratcheting up consumer connections and simultaneously working with its global partners on key issues such as managing inventory movement and cash flow generation. The objective is to get partners’ inventory levels to 14 to 16 weeks on hand and the company’s to about 14 weeks, and an overall movement toward “strong full-price” sellthroughs.
As for North America, Nike reported 5 percent topline growth in the quarter ended Feb. 29 as digital sales grew 33 percent in constant-currency and revenue from Nike apps rose nearly triple digits. Beyond digital, two go-forward growth pillars for the brand are women’s, which experienced third quarter growth that was nearly double that of men’s footwear and apparel, and apparel. The company says it continues to work on defining seamless digital and brick-and-mortar experiences and creating “frictionless” online to offline journeys for its customers. To that end, the Swoosh reports that its key city strategy is paying dividends. Quarterly revenue growth in New York and Los Angeles was up double-digits in both markets. And Foot Locker’s Washington Heights neighborhood store in New York and several L.A. retail efforts that cater to Latino communities are showing strong consumer response to localized merchandising and marketing efforts.
Promising to “save powder” for the return of sport in its FY21 that begins June 1, Nike says it currently has much flexibility with its demand creation budget, opting to move quickly with low-cost digital messages. Last weekend, the missive for U.S. and European consumers focused on being active while at home.