Digital is the New Normal for Nike. Between June and August, online sales increased 82%, offsetting the continuing decline in physical sales. The trainer brand also saw its profit rise slightly.
Stable quarter despite Covid
Nike recorded a turnover of 10.6 billion dollar (9 billion euros) in the last quarter, from June to August. This is barely 1% less compared to the previous year, mainly due to exchange rate fluctuations. It was also better than the 9.13 billion dollar that analysts expected on average. While sales increased in main markets, including China, Japan, South Korea and the United Kingdom, sales in the North American home market fell.
The sportswear manufacturer was thus able to achieve a fairly stable performance, despite still limited physical shop sales, mainly due to the corona virus and security measures, according to CEO John Donahoe. The lower visitor numbers are partly made up for by the fact that visitors come with the intention to buy, but e-commerce in particular skyrocketed: online sales rose by no less than 82%.
Lower costs
The digital shift also appears to be of interest to Nike below the line, as the net profit amounted to 1.52 billion dollar, or 0.95 dollar per share. That is twice as much as the 0.42 dollars per share that analysts assumed and also (slightly) more than last year’s 0.86 dollars. The main reason: the ‘cost of sales’, the cost for each item sold, was lower. The company was able to save on marketing costs, as there were few, if any, major sporting events, and Nike also had lower administrative and sales costs.
For CEO John Donahoe, it’s grist to the mill, because the top man is convinced that the sports label should bet more on (online) direct sales than on the classic wholesale channels. He therefore believes that the shift to online will become a lasting trend. “We know that digital is the new normal. The consumer today is digitally grounded and simply will not revert back,” he said to the BBC. Research agency GlobalData nuanced in a recent study that physical stores continue to play an essential role, even in e-commerce sales.
