Nike ‘Just Does It’ On Digital-First Transition, D2C Sales And A Hot Loyalty Program

Nike

Nike has taken a three-pronged approach to get and keep customers.

Nike showed in its latest earnings report that the sportswear giant is “just doing it” when it comes to three of the COVID-19 era’s hottest retail trends – digital-first shopping, direct-to-consumer (D2C) sales and building a killer loyalty/rewards program.

“Our strategy is sound, our strategy is working and we’re excited by what we’re seeing as we continue to execute it,” Nike President and CEO John Donahoe said on Friday (Dec. 18) on the company’s fiscal second-quarter earnings call.

Nike had been building a digital-first, D2C sales presence long before the pandemic hit, and that investment really paid off in the company’s fiscal Q2, which ended on Nov. 30.

The company said digital sales of its flagship Nike brand (the firm also owns two others) soared by 84 percent during the period without adjusting for currency changes. That included more than 100 percent digital sales growth in North America.

“We’ve now had three straight quarters of roughly 80 percent [worldwide] digital growth,” Donahoe, a former top eBay executive who took the helm at Nike in January, told analysts. “This is the sharp point of our strategy. The consumer shift to digital is permanent, and our digital penetration will only increase in years to come. … We have a proven playbook, led by digital.”

Strong Digital Sales Offset Weaker Wholesale and In-Store Volume

Nike said the digital gains more than offset weakness in the company’s wholesale business and traffic at company-owned stores.

“Digital is now woven into everything we do as a company,” Donahoe said. “It’s how we operate and prioritize, from how we engage with members to how we operate our supply chain to how we serve consumers in the marketplace.”

The CEO added that Nike’s digital engagement goes beyond merely selling products online. For instance, he said the firm generated more than 7 billion brand impressions and 400 million social engagements worldwide on social media during the latest quarter, “directly connecting with consumers on the platforms where they spend their time.” Donahoe also noted that the company’s “Never Too Far Down” film – a video narrated by basketball superstar LeBron James – was the No. 1 ad consumers chose to watch on YouTube during 2020.

The CEO said such a full-court press into all things digital helped Nike score record-setting online sales during Black Friday Week and strong performance during China’s Singles’ Day, where the company saw $500 million in transactions. That helped Nike’s total online and offline fiscal Q2 revenues in the China region grow by 24 percent vs. just a 1 percent gain for North America.

A Booming Loyalty/Rewards Program 

Nike also reported big gains for its Nike Membership initiative, a free loyalty program that offers exclusive sales events, rewards points and more.

“Since the pandemic began, we’ve added more than 70 million new members globally, and we’re deeply focused on the member-funnel outcomes, including new-member buying, reactivation and retention,” Donahoe said. “And it’s working. Importantly, buying-member growth is outpacing new- and active-member growth, and growth in member demand is outpacing total digital growth.”

Strong Overall Results 

All in, Nike reported fiscal Q2 revenues of $11.2 billion, up 9 percent from the $10.3 billion the firm reported in the same period last year. Net income grew 12 percent to $1.3 billion from $1.1 billion a year earlier.

That translated to 78 cents of earnings per share on a fully diluted basis, up 11 percent from the 70 cents Nike reported in the same period last year. Analysts had only expected Nike to report $10.6 billion in revenues and 62 cents in EPS.

As for the future, Nike boosted its revenue guidance for the fiscal year as a whole (which ends in May) to growth in the low-teens in percentage terms.

 

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