Nike keeps investing despite falling profits

Nike is feeling pressure on margins due to rising costs. Yet the sports brand continues to invest: its partnership with Zalando is expanding and in Belgium, the distribution centre is reaching 5,000 workers next month.

Collaboration with Zalando

Nike’s sales rose 4% last quarter to 12.7 billion dollars. Although that is more than expected, the sportswear retailer is paying a price for it. Rising costs are squeezing gross margins and the brand continues to perform weakly in China, causing earnings per share to fall 20%. Gross margins fell to 44.3% due to higher freight and logistics costs, lower margins at Nike Direct and unfavourable currency fluctuations.

In what was Nike’s first quarter, the brand did set the stage for another year of strong growth, according to CFO Matthew Friend. The expansion of the partnership with Zalando is evidence of this. By linking their Nike account to Zalando, customers in numerous European countries (including Belgium and the Netherlands) will now have access to a selection of products available only to Nike members. This way, they can also purchase the exclusive range on Zalando.

At its Belgian distribution centre in Laakdal, Nike will also pass the 5,000-employee threshold in October. Some 400 more employees currently working there as temps will be hired by the sports giant. The branch is continuing to look for more employees.