Investors nervously awaiting Nike’s earnings just found one less reason to worry. Thanks to its exceptional ecommerce offerings and expanded apps to help people working at home, the company’s results in China suffered far less than expected -- and offer plenty of hope the company will prove resilient in the face of the expanding COVID-19 crisis.
Its apps offering workout-at-home coaching saw an 80% increase in China during the quarter, leading the company to extend its offerings for homebound exercisers here in the U.S. It is now offering its NTC Premium, normally a subscription-based service, at no charge.
The Beaverton, Oregon-based company says that in its fiscal third quarter, revenues rose 5%, to $10.1 billion. Nike’s direct-to-consumer sales rose 13% on a currency neutral basis, with digital sales shooting up 36%.
The company saw growth in other regions. In Greater China, hard hit by the virus in the last month of the quarter, sales fell 4%, after 22 consecutive quarters of growth. Digital sales gained 30% as physical stores shut down.
While some 75% of its China doors were closed during the peak of the pandemic, “nearly 80 percent of doors are open in Greater China with an even higher rate in key cities,” Nike says.
“As we start to see recovery in China, no one is better equipped than Nike to navigate the current climate,” says John Donahoe, President and CEO, in the company’s earnings announcement.
Financial analysts, who have been bracing for the worst in terms of early earnings reports, also reacted positively. In his report on the company’s results, Oppenheimer & Co.’s Brian Nagel says he is encouraged by Nike’s efforts “to navigate successfully unprecedented uncertainty near term, and [is] even more impressed with the underlying power of the company’s global brand."
He added: “Increasingly well-built-out digital capabilities and online operations allowed Nike to stay connected with consumers in China as stores were shuttered, and are now helping to drive a similar dynamic in the U.S. and Europe.”
And while business will be weaker in in the months ahead, the company says it has found “opportunities to control costs so as to cushion impacts to earnings.”
Nagel is also impressed with Nike’s marketing shift to focus on health and at-home workouts.
Calling Nike’s results “much better than feared,” Jonathan R. Komp, who follows Nike for Baird, writes that the company’s early recovery in China is likely to help shape expectations for other regions.
“With the recovery well underway in China,” Komp writes, “Nike now has a playbook once stores elsewhere begin to reopen,” even if the timing for return to retail is still unknown. He adds that the results prove Nike’s “superior positioning amid a challenging environment.”
Komp is also impressed by Nike’s digital strength, which now accounts for about 12% of sales but 51% of growth.