Nike says there will be an acceleration in the use of data to inform product design and capabilities this year

Nike says there will be an acceleration in the use of data to inform product design and capabilities this year

US sporting goods giant Nike expects to accelerate its efforts to leverage data and analytics to inform design and capabilities during the current fiscal year – and ultimately drive speed and efficiency throughout its supply chain.

Earlier this year the company acquired Israel-based fashion technology company Invertex and leading consumer data analytics firm Zodiac.

The former is part of Nike's Consumer Direct Offense strategy, which is fuelled by its 'Triple Double' strategy: 2X Innovation, 2X Speed and 2X Direct connections with consumers. In essence, the new alignment will allow Nike to better serve its consumers personally, at scale – or what the company calls "creating a local business, on a global scale."

Speaking on the firm's latest earnings call, CEO Mark Parker told analysts the company is in the early stages of leveraging data to inform business decisions, particularly in design and planning.

"This is a constantly moving opportunity for us; design and product creation, the express line, the supply chain, they are all connecting digitally," he told analysts. "Demand planning is absolutely a critical part of advancing this capability moving forward.

"I feel like we're making a tremendous progress in that respect. This next fiscal year will be an acceleration; the use of data to inform product design and capabilities going forward. And then, it's actually impacting how we manage our supply chain in our manufacturing flexibility in response time. So you'll see a lot of scaling of the data and analytics capabilities for Nike here in the months and quarters ahead."

Investment in digital

Over the 12 months to the end of May, Nike has "invested significantly in capabilities that heighten our ability to sense the market and drive efficiency through our supply chain."

The company scaled seven key distribution centres globally. One of those in North America is Nike's new Rebound facility; the first to be focused solely on accepting returned products and getting them back into the marketplace as fast as possible in order to maximise full price, in-season selling.

The company has also integrated the Zodiac team, who are providing Nike with new predictive tools and advanced analytics to drive targeted growth.

Nike's Express Lane manufacturing initiative has also seen improvements with new colours and materials added. The platform, which quickly creates, updates and fulfils products in response to consumer demand, is the company's fastest growing product engine that serves as a key focal point of its Speed initiatives.

"Express Lane, as a whole, is leading to significantly stronger full-price sell-through rates," Parker told analysts. "Through digital, we're also inventing new manufacturing tools that allow us to push the boundaries of product creation – like computational design with React or new Flyknit apparel.

"Automation throughout our supply chain continues to drive speed and efficiency. 2X Speed is a multi-year journey and while we've made progress, we also know there's even greater opportunity ahead in this space."

Financial performance

The comments came after Nike last week revealed double-digit increases in both earnings and sales in its fourth-quarter, sending the company's share price up 9.34% in pre-market trading.

Sales were boosted by a return to growth in North America, where revenues were up 3% to US$3.88bn. Total sales reached $8.9bn, an increase of 13% on the prior year, boosted by strong double-digit revenue growth in international markets and Nike Direct globally.

Earnings for the three months to the end of May were up 13% to $1.14bn thanks to a gross margin expansion of 60 basis points to 44.7% and a lower tax rate.

For the full year, however, earnings slumped 54% to $1.93bn, primarily related to the impact of the Tax Act, which offset strong revenue growth of 6% to $36.4bn.

"We've closed out the fiscal year with a strong performance across our business," Parker told analysts. "Being closer to the consumer and our new offence has us focused on the biggest growth opportunities, making the right investments with the greatest returns.

"We fuelled increased demand for Nike in fiscal 2018. In fiscal 2019, we'll continue that acceleration with an even faster pace of innovation and by serving consumers more completely across our entire portfolio."