Nike is doing very well in China. It’s appealing more to women. Its direct-to-consumer strategy continues to pay off. It’s even able to recover quickly from its mistakes. Bottom line: Nike had a 10% increase in revenue on a currency neutral basis for the Q1 2020 quarter ending in August with earnings per share up 28% from the previous year, it reported yesterday.
“Nike’s Greater China revenue climbed 22% to $1.68 billion. The company, which doesn’t own factories, produces about 25% of its global apparel and footwear in China,” Kimberly Chin and Khadeeja Safdar write for The Wall Street Journal.
“Nike is a brand of China for China and the results continue to prove it out,” CEO Mark Parker said on a call with analysts transcribed by Seeking Alpha, pointing out that the company has experienced double-digit-percentage growth in the region every quarter for more than five years.
“Its shares rose more than 5.5% in after-hours trading on the news, topping its previous all-time high of $90,” CNBC’s Lauren Thomas writes.
“We were all inspired by the incredible athletes and performances at the Women’s World Cup. It was also a tremendous stage for NIKE innovation,” Parker said on the call, Martin Baccardax reports for The Street.
“‘During the all-Nike final, we also debuted our top football boot innovation, the Mercurial 2019,’ he added. ‘In addition, apparel revenue from the 2019 Women's World Cup was four times bigger than it was for the 2015 event. Across the wider business, we stayed intensely focused on the apparel classifications that matter the most to the female athlete; bras and tights.”
In fact, “Nike outfitted 14 of the tournament’s 24 teams -- including three of the four semifinalists and the champion U.S. side. The U.S. women set records for soccer-jersey sales on Nike.com," Eben Novy-Williams points out for Bloomberg.
“In December, Parker said 2019 would be a ‘true tipping point’ for women in sports. The company has continued to push that in its marketing, including ‘Dream Crazier’ ads narrated by tennis champion Serena Williams and a ‘Dream With Us’ campaign around the U.S. women’s soccer team,” he continues.
The strong results are “a sign that the ‘Consumer Direct Offense’ strategy Nike announced in June 2017 is generating returns for the company. Nike has traditionally sold most of its products through brick-and-mortar retailers, but this new strategy prioritized speeding up innovation, producing and getting products to consumers faster and selling to and engaging with consumers more directly through digital channels,” Clare Duffy writes for CNN Business.
“Nike’s digital business grew 42% in the quarter, led by mobile and app experiences," Duffy reports. “Nike has been investing in growing the membership of its SNKRS and Nike+ apps, and integrating those apps into customers’ in-store experiences,” she adds.
“Part of its strategy … has been to sell more in its own stores and website versus in discounted outlets. But it still keeps key relationships with retailers like Foot Locker, Nordstrom and Dick’s Sporting Goods,” CNBC’s Thomas remarks, adding that August is also typically Nike's strongest quarter, thanks to back-to-school shopping.
“The strong results show no ill effect from Nike’s decision to pull a limited-edition shoe that featured a controversial version of the American flag or any backlash from allegations by lawyer Michael Avenatti that the company is facilitating bribery and corruption within college basketball,” Novy-Williams adds.
Regarding that last point, Avenatti yesterday “withdrew his request to subpoena Nike Inc. in connection with the federal criminal case accusing the embattled lawyer of extortion, after the company said prosecutors already possessed all the documents he sought,” Reuters’ Jonathan Stempel reports.
“The withdrawal came fewer than 24 hours after prosecutors called the subpoena a ‘fishing expedition’ unrelated to the extortion case, which the U.S. Department of Justice announced in March. Avenatti has pleaded not guilty,” Stempel adds.
“Our targeted strategic investments are accelerating Nike’s digital transformation and extending our competitive advantage. Even amid the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth across our global portfolio,” Nike CFO Andy Campion states in the earnings news release.
More simply, as Yogi Berra said, it’s not “making too many wrong mistakes.”