Nike Increases Advertising And Digital Budget; Sales Up

Fueled by increased marketing spending, Nike says sales rose 8% in its fiscal third quarter, with gains in most categories and geographical regions. And net income for the Beaverton, Ore.-based company rose 20%.

In its announcement, president and CEO Mark Parker credits the “robust” performance to “serving the athlete personally every day.” And he says that more innovative products, including those unveiled last week, will be the source of future growth.

Revenues climbed to $8 billion, a gain of 14% on a currency neutral basis. (Growth was a little slower than the $8.2 most observers expected, rattling investors.) Sales for the Nike brand climbed 15%, in currency neutral terms, to $7.6 billion. And results fell 5% for Converse, to $489 million, down 5% on a currency neutral basis. And futures orders rose 12%. Net income increased 20% to $950 million



Nike says it boosted spending on demand creation -- including advertising, brand events and digital marketing -- 10% to $804 million.

The company recently unveiled a handful of innovations that it says represent “the era of personalized performance.” The self-lacing shoe got plenty of buzz, promising “a groundbreaking solution to individual idiosyncrasies in lacing and fit preferences.”

But it also introduced changes to Nike+, which it says “translates the “plus” to “personal.” It offers customized guidance and support, and resources tailored to coach a range of activity, from run times to a yogi’s flexibility. The suite of new digital products includes starter programs, plus product suggestions. “We have the most personal solutions to today’s most common challenges,” Parker says in the announcement.

The new app, available in June, also takes a different approach to shopping, with personalized product recommendations, such as reserved shoes based on their interests. 

Other introductions include an anti-clog traction technology that keeps cleats from getting loaded up with mud, as well as the new Nike Air VaporMax, which incorporates so much air into the design that it can ditch the traditional foam midsole.

Observers expect the new additions to boost sales. “We see support ….in part, from a substantial amount of new product innovation,” writes Dave Weiner, a research analyst for Deutsche Bank, in his recent report on Nike, “including a broad offering of new mid-height collar shoes within running, basketball, soccer, tennis, and skate, a continued focus on personalization with Nike mobile connectivity and self-tying shoes, and new anti-clog cleat offerings.”

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