The coronavirus, and a new strategy with fewer Latin-American wholesalers, have forced Nike third quarter net profit down by 23 % (December to February). Turnover did go up 5 %, but the sports retailer fears a steep decline in the next quarter.
Coronavirus in China
Nike's turnover went up 5 % to 10.1 billion dollars (9.3 billion euros), which would even be a 7 % rise excluding exchange rate fluctuations. Nike Direct went up 13 %, while e-commerce sales even rose by a whopping 36 %. Despite an excellent start in China (with a double-digit growth at the start of the quarter), the coronaviris pushed Chinese quarterly sales down by 4 %. It is quite likely that the result will be far worse in the fourth quarter, with the coronavirus spreading around the world.
Net profit, however, crashed by 23 % to 837 million dollars (some 750 million euros) and or 53 cents per share - down from 59 cents the year before. The American sports fashion giant saw two important reasons for this drop: the corona crisis left Nike with 7 % more items in stock, while the adoption of a selective partner model in Latin-America is estimated to have cost 0.25 dollars per share in profit - almost half of the profit that still remains.
"As we start to see recovery in China, no one is better equipped than NIKE to navigate the current climate", CEO John Donahoe said. "As we close Q3, NIKE’s Brand leadership and business momentum have been stronger than ever and unrivaled around the world", CFO Andy Campion agreed with confidence.