Nike, Inc has reported fiscal 2022 financial results for its third quarter (Q3) ended 28 February:
- Q3 reported revenues were US$10.9bn, up 5% compared to prior year and up 8% on a currency-neutral basis.
- Nike Direct sales amounted to $4.6bn, up 15% on a reported basis and up 17% on a currency-neutral basis.
- Nike brand digital sales increased 19%, or 22% on a currency-neutral basis, led by 33% growth in North America.
- Revenues for the Nike brand were $10.3bn, up 8% compared to prior year on a currency-neutral basis, led by 13% growth in EMEA.
- Revenues for Converse were $567m, down 1% on a reported basis and up 2% on a currency-neutral basis, led by strong performance in North America and Europe, partially offset by declines in Asia.
- Q3 net income declined 4% to $1.4bn from $1.45bn a year prior.
- Gross margin increased 100 basis points to 46.6%.
“Nike’s strong results this quarter show that our Consumer Direct Acceleration strategy is working, as we invest to achieve our growth opportunities,” says John Donahoe, president and CEO of Nike, Inc. “Fuelled by deep consumer connections, compelling product innovation and an expanding digital advantage, we have the right playbook to navigate volatility and create value through our relentless drive to serve the future of sport.”
Commenting on the numbers, Emily Salter, retail analyst at GlobalData, notes Nike, Inc delivered another strong quarter, with Q3 FY2021/22 revenue growing by $514m to $10.9bn to surpass the pre-pandemic period in FY2019/20 by 7.6%, as its strong brand identity and sportswear proposition continue to resonate with shoppers, especially in North America and EMEA.
“In its Q2, Nike predicted that the worse of its supply chain woes were over as inventory and transit times improved, and though it reported that inventory is still improving, transit times in North America worsened in its Q3. These struggles are likely to intensify throughout its Q4 and beyond, with Covid-19 cases spiking in China, leading to a snap lockdown in the port city of Shenzhen, affecting factories and the container terminal of Yantian. Like all brands with presence in Russia and Ukraine, Nike also faces uncertainty regarding the impacts of the war, though Russia only makes up around 1% of its total sales.
“All regions experienced year-on-year growth in Q3 except for Greater China, where currency-neutral sales fell by a worrying 8%. Greater China has been a constant underperformer for Nike in FY2021/22 and this seems unlikely to change, and though the country’s zero-Covid policy will not have helped the brand’s performance, the consistent underperformance points to bigger troubles, likely stemming from Chinese consumers boycotting Nike, along with other Western brands, due to its comments about the allegations of forced labour involved in cotton production in the Xinjiang region.
“Surprisingly, EMEA outperformed North America despite its stricter Covid-19 restrictions throughout the past two years, with EMEA’s sales 2.6% higher on a two-year comparative versus North America which was still 2.4% lower than pre-pandemic. This can be attributed to the supply chain troubles that have been heightened in North America, with demand outstripping supply.
“Nike’s push for direct-to-consumer dominance continues, with Nike Direct sales increasing by 17% on a currency-neutral basis, with sales in its physical stores growing by 14% despite declines in North America and Greater China. As the brand continues to reduce its wholesale presence, recently ending its partnerships with the likes of Footlocker, Very.co.uk and DSW, wholesale revenues underperformed the total business, only rising by a muted 1%. These withdrawals will hit the affected retailers hard, but will help solidify shopper loyalty and product exclusivity at Nike, and proves the brand’s confidence in its ability to drive shoppers to its own channels, with its innovative instore environments, market-leading online proposition, and host of apps to increase the number of touchpoints with its shoppers.”
Nike recently hailed the success of ramping up its direct-to-consumer (DTC) strategy and it looks as though more brands are following suit.