Nike Direct-to-consumer Sales Help Counter China Declines
Nike Inc. logged a slight decline in fourth-quarter sales, but nonetheless topped expectations as strength in its direct-to-consumer business offset declines in China due to COVID-19-related shutdowns.
Net income fell 5 percent to $1.44 billion, down from $1.51 billion a year earlier. Diluted earnings per share were 90 cents, down from 93 cents.
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Sales dipped down 1 percent to $12.2 billion from $12.3 billion in the prior-year’s quarter.
However, Wall Street was expecting earnings per share to fall 13 percent, to 81 cents, and revenue to dip 2 percent to $12.07 billion.
Investors were satisfied with the quarter and pushed shares of the company up 0.4 percent to $110.91 in after-hours trading on Wall Street.
Like many international companies, Nike was facing a number of hurdles in the period as the COVID-19 lockdowns in China prompted store and factory shutdowns, and transportation costs were still high.
Sales in China slid 19 percent to $1.6 billion, with a 39 percent drop in the apparel part of the business.
But there were bright spots, notably the Nike Direct division, which saw sales rise 7 percent in the fourth quarter, sparked by strength in the Asia Pacific and Latin America regions as well as Europe, the Middle East and Africa. North American sales rose 5 percent.
By division, sales of the Nike brand were down 1 percent to $11.7 billion despite 20 percent growth in EMEA. And Converse also reported a slight dip in sales to $593 million, down 1 percent from the prior year’s quarter, a factor the company attributed to “wholesale revenue declines offset by growth in our direct-to-consumer business.”
In spite of the wobbles, management remains upbeat.
“Nike’s results this fiscal year are a testament to the unmatched strength of our brands and our deep connection with consumers,” said John Donahoe, president and chief executive officer of the company. “Our competitive advantages, including our pipeline of innovative product and expanding digital leadership, prove that our strategy is working as we create value through our relentless drive to serve the future of sport.”
Matt Friend, executive vice president and chief financial officer, added, “Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale.”
The Consumer Direct Acceleration strategy is a digitally focused business strategy that increases investment in e-commerce and technology and highlights direct-to-consumer efforts.
For the year, Nike’s net income rose 6 percent to $6 billion. Diluted earnings per share increased 5 percent to $3.75. Revenues rose 5 percent to $46.7 billion.
Sales for the Nike brand were $44.4 billion, up 5 percent from the prior year, Nike Direct revenue increased 14 percent to $18.7 billion, led by digital growth of 18 percent and an increase of 10 percent in Nike-owned stores.
Revenues for Converse were up 6 percent to $2.3 billion led by a double-digit growth in direct-to-consumer sales despite lower wholesale revenues.
Nike this year is celebrating its 50th anniversary in business.
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