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Direct-to-consumer sales lead Nike sales growth

Nike: many sustainable initiatives in train

Nike says its focus on a strategy of selling direct to consumers is behind the 16% rise in revenues and a 25% rise in direct sales that it has unveiled in the first quarter of its financial year. That rise, compared to the same time last year, comes both from its own brand shops (+24%) and from Nike brand digital sales, which grew by 29% globally and by 43% in North America. 

“Nike is a growth company with a market opportunity as large as it’s ever been,”Matt Friend, executive vice president and chief financial officer at Nike. “Our Q1 results illustrate how Nike’s consumer direct acceleration strategy continues to focus growth and transform our long-term financial model.”

Revenues for the quarter, to August 31, came in at $12.2bn (£8.9bn), 16% up on the same time last year. Within that, Nike brand revenues came in at $11.6bn (£8.5bn, +12%), and Nike brand direct sales came in at $4.7bn (+28%). Converse sales of $629m (£460m) were up by 7% – with direct to consumer sales leading its growth in both North America and in Europe. Net income of $1.9bn (£1.4bn) was 23% up on last time. 

Nike said that spending on marketing rose by 36%, partly from increased investment in digital marketing supporting increased online demand, and partly because the quarter is one year on from Covid-19 closures, when spending fell. Costs increased by 15%, as a result of wages, strategic technology investments and variable costs from selling direct. 

Nike president and chief executive John Donahoe says: “Nike’s strong results this quarter are continued proof of our deep consumer connections, unrelenting innovation pipeline and a digital advantage that fuels our brand momentum. We have the right playbook to navigate macroeconomic dynamics as we create value through our relentless drive to fuel the future of sport.”

Commenting, Emily Salter, senior retail analyst at data and analytics business GlobalData, says: “Covid-19’s impacts on Nike were fairly minimal due to its sportswear proposition and strong direct-to-consumer (DTC) online offer; and the start of its new financial year has been boosted by team sports returning, consumers still prioritising their health and wellness, and an element of pent-up demand for its higher-end streetwear styles, especially footwear. Nike will also have benefitted from heightened consumer awareness and desire for sporting attire during a long-awaited summer of sport with the Tokyo Olympics and Paralympics, the Euros and Wimbledon. 

“The future is not all rosy though, as Nike lowered its full-year revenue guidance to mid-single digit growth (from low double-digit growth) after warning of the impact of the supply chain issues that are being faced by many players in the apparel industry, stating that its Q1 growth could have been stronger in the absence of these problems. Most of its factories in Vietnam are closed due to Covid-19 lockdowns, so the brand has lost about 10 weeks of production since mid-July. This, combined with the fact that shipping times from Asia to North America doubled during the quarter, makes it look highly unlikely that it will be able to meet the high levels of consumer demand over the festive period, stifling its sales in Q2 and potentially beyond.”

Nike is ranked Top250 in RXUK Top500 research.

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