Nike Inc.’s direct strategy isn’t going anywhere.
The Beaverton, Oregon sportswear company’s direct-to-consumer business led growth during its fiscal first quarter ended Aug. 31 as the company continues to exercise discipline over its wholesale strategy.
“We continue to see the consumers want to connect directly and personally with our brands,” Nike Inc. CFO Matthew Friend told analysts Thursday afternoon. “And, in fact, member engagement within our direct business is up double digits versus the prior year with increasing average order values.”
Nike Inc.’s direct business generated revenue of $5.4 billion in the quarter, rising 6% in constant currency from the year-ago period.
Wholesale revenue increased 1% to $7 billion.
Friend called out Nike’s stores as having an “especially strong quarter,” with double-digit growth from last year, and membership customers helping drive that business.
In early June the company began to note a growing shift from digital to physical shopping, even with the majority of customers beginning their purchasing journey online. As a result, Friend said the company reacted quickly to ensure its stores capitalized on the trend with full-price product.
Nike Wholesale Update
While the direct business continues to see momentum, wholesale has undergone shifts the company said are paying off.
Nike has for a while now been shifting sales away from the wholesale channel over to its own stores and e-commerce sites. At the same time, it’s made clear it’s not abandoning the wholesale channel altogether and will continue to work with key partners.
Among the company’s most important retail partners, there was high-single digit to low-double digit growth during the quarter. That group includes retailers such as Dick’s Sporting Goods and North American specialty stores; Zalando and Sports Direct in the Europe, Middle East, and Africa market; and Topsports in Greater China.
“We continue to reset our business with Foot Locker, planning for near-term sales declines as they invest in consumer-right concepts for the future,” Friend said.
Last year Nike began shifting product out of Foot Locker to focus on direct. The strategy also included a pulling away from retailers such as DSW and Macy’s, followed by a reversal of that decision earlier this year.
“Ultimately, we have a segmented portfolio of strong partners across price points and channels with no single partner representing more than a mid-single digit of Nike’s total business,” Friend said. “Looking across the entire marketplace, we are confident in our brand momentum as we accelerate direct consumer connections, elevate our brands, and create capacity for long-term growth.”
CEO John Donahoe added Nike will “selectively” add wholesale partners in markets “where we see gaps, whether it’s in price point or a gap in a product segment.”
Nike Brand Revenue Grows, Converse Falls
Total Nike Inc. revenue in the August quarter was $12.9 billion, which was an increase of 2% in constant currency from a year ago.
On a by-brand basis, Nike revenue increased 3% to $12.4 billion.
The brand did well in the EMEA, greater China, and Asia Pacific Latin America markets. However, North America was down for the Nike brand in the quarter.
North America saw total revenue fall 1% for the Nike brand in the quarter, led by an 8% decline at wholesale.
The company’s other markets, greater China, EMEA, and APLA, grew revenue 12%, 6%, and 3%, respectively.
Little was offered on Converse during the analyst call, outside of Friend saying the brand, along with Nike’s other key divisions, is seeing “positive consumer reception” with newer products.
However, Converse slipped in the quarter with revenue off 9% from a year ago to $588 million.
The brand’s decline was driven by North America. Converse in Asia, meanwhile, saw growth.
Kari Hamanaka can be reached at kari@shop-eat-surf-outdoor.com.
