How The Pandemic Accelerated Nike's Overall Strategy

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Friends,

Nike, the worlds largest sports clothing and shoe manufacturer, reported earnings yesterday - beating all analyst expectations and showing impressive growth numbers from the digital segment of their business.

The stock has responded accordingly, set to open up more than 13% this morning.

Here’s a quick recap of what you need to know (Source):

• Reported earnings per share of 95 cents vs. expectations of 47 cents

• Reported $10.59 billion in revenue vs. $9.15 billion expected 

• Digital sales are up 82%

• North American sales were down 2%

• China sales are up 6%

• 90% of retail stores globally are now open

Before we get into it, as always, let me clarify.

I’m not an equity analyst, and it would be foolish to buy stocks based on my opinion alone, but here’s something I thought was interesting :)

( 📸 source / Nike)

Digital Acceleration

Nike’s business has historically relied heavily on brick and mortar for financial success, but with the global COVID-19 pandemic closing the majority of their stores, the business had no choice but to accelerate their digital strategy.

Online sales rose 82% in the first quarter, which now account for 30% of Nike’s overall revenue number - a figure they had hoped to achieve for their digital business by 2023.

Nike has worked hard to convert digital consumer purchase point apps, like SNKRS, into fully functioning line items on their income statement. Sure, the pandemic has helped, but it really was just an acceleration of what was already underway.

This chart is the perfect example why every business, if they didn’t already have it in place, will need a significant e-commerce strategy post-pandemic.

From a revenue perspective, I wouldn’t be too concerned with Nike’s overall lack of growth. Analysts expected Nike to lose money, which they barely did, even though they’ve been offering massive sales and increased incentives to encourage consumers to spend during a period of such uncertainty.

Considering Nike was able to essentially match revenue numbers from a year ago, despite facing the closure of the majority of their stores, they have to see this quarter as a major victory. The stock market certainly did.

Next on the horizon for Nike is continued success through digital, expansion of their international business, and a well executed plan for the reopening of retail here in the United States.

P.s. - I thought this was funny. On yesterday’s earnings call, an analyst asked Nike management if they would consider a partnership where the Travis Scott / McDonalds meal came with a pair of sneakers.

Their response: “I’ll keep it to one word, No.”

If you want to read more about Nike’s earnings announcement yesterday, click here.

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Extra Credit

Today’s extra credit isn’t necessarily Nike related, but I thought it was too awesome not to include.

Bloomberg reporter Jon Erlichman posted a screenshot yesterday of the email that started it all for Airbnb. It’s crazy to think what probably seemed like such a simple idea at the time, has transformed into the massive success it is now.

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