Nike plans to have US$7bn in revenues from women by 2017

Nike plans to have US$7bn in revenues from women by 2017

Sporting giant Nike has homed in on the "tremendous energy" in women's apparel and believes there is a significant opportunity for the company to grow this business further globally.

The comments came as Nike last week revealed a 23% increase in second-quarter earnings, reflecting strong revenue growth and gross margin expansion.

Speaking on the firm's earnings call, CEO Mark Parker said that delivering such results requires "a sharp focus on our growth opportunities, making disciplined choices to invest in those areas with the highest potential for return".

And one of those areas is women's apparel, where Nike is keen to retain its focus. "There is tremendous energy in women's and a significant opportunity for us in this important business," Parker told analysts.

Closing the gap
At the end of last year, Nike's men's wear business was almost three times as big as the women's business. Nike now plans to have US$7bn in revenues from women by 2017 and investments being made by the firm suggest the company should have no problem closing that gap.

Indeed, Parker said: "We'll start to reduce that differentiation between men's as a percentage of Nike's business versus women's. So very, very bullish on the women's opportunity and the response to the work that we've already done in elevating that part of our product and our communication."

Innovations during the quarter include the Nike Pro Base Layer collection, the continued strength of Nike's Pro bra, and its Air Max collection. Nike also opened women's-only stores in Newport Beach and Shanghai.

"The momentum we're seeing in this business is incredible," added Trevor Edwards, president of Nike brands. "Ultimately, we see Q2 as just the beginning of great things to come in our women's business. We believe we are absolutely on target to go after our $7bn goal for fiscal year 2017, but we truly believe it's not about that, it's actually about beyond, continuing to really move the needle around our women's business.

"Our strategy means connecting and serving millions of women through the digital platforms, elevating the online and in-store shopping experiences, offering premium product assortments that drive real growth and as always, leading with innovative products."

Commenting on whether Nike can take a bigger share of the sector, FB&R analyst Susan Anderson noted: "Women's continues to be a large opportunity for activewear players in the US, as growth in this category is just now starting to accelerate. Given this dynamic, many players are focused on taking share in women. We believe Nike is well-positioned to continue to grow its share (currently $5bn/21% of wholesale equivalent revenue, 14% market share) in this demographic, given its innovative culture, focus on the customer, and best-in-class marketing."

Sustainable China growth
Separately, Nike spoke about its plans in China where the company has managed to stabilise sales following a dip in 2011. In its second-quarter, revenues grew 21% and pre-tax profit 31%.

While there is concern from analysts over slower growth and more competition in China affecting this rebound, the company is confident it has the right strategy to drive sustainable, profitable growth in China over the long term.

"In greater China, we continue to see the benefits of our strategy to reset the marketplace," said Edwards. "Q2 revenue growth of 21% reflects our plan to deploy a more consumer centric distribution strategy, and this approach is definitely working.

"We feel very good about the continued trend on the China business. The metrics continue to show that when you look into working with our partners, their doors continue to profile really well. We feel very good and the inventories in the marketplace are very clean. So all the dimensions of those businesses will suggest that we will continue to see continued strong growth in China."

Parker pointed to the "strong" response to the product introduced in China, adding that the strength of the Nike brand in the country is now "tremendous".

"We're bullish on the opportunity, and we just launched dot com less than seven months ago in China, and the response there has exceeded our expectations. So that's another great opportunity for us."

Speaking more broadly, Parker said Nike needs to remain "nimble" in order to identify and capitalise on opportunities to grow. "We need to balance making critical investments with managing risks, whether they be currency headwinds, commodity cost fluctuations, or an evolving political landscape.

"Delivering results like these requires a sharp focus...making disciplined choices to invest in those areas with the highest potential for return. The world of sport is constantly evolving as is the environment in which we operate. That opens up new opportunities for Nike every day."