Nike’s Customer-Centric Retail Surges Sales

Nike continues to "put the customer at the center," which is helping the athletic apparel retailer grow its direct connections with shoppers.

Nike revenue surged 10% on a reported basis and 13% on a currency-neutral basis to $10.3 billion in its second quarter of 2020, thanks to strong growth across all regions. Analysts had anticipated earnings of 58 cents per share on $10.09 billion in revenue.

“Our strong growth continues to be fueled by an increasingly more direct connection to consumers in the marketplace,” explained CFO Andy Campion during the retailer’s recent earnings call.

Nike Direct grew 17% on a currency-neutral basis in the quarter, led by Nike Digital, which spiked 38% driven primarily by the Nike app and SNKRS app, which are both live in more than 20 countries. For the quarter SNKRS app grew strong double digits, the Nike app more than doubled, and active users for the apps are growing almost triple digits.

CEO Mark Parker, who earlier this year announced in October he will step down in the coming year, noted that there are many components to the investments Nike has been making to fuel its digital transformation, including consumer retail experiences that merge online and off-line, new operational capabilities, and powerful partnerships — all enabled by the digital talent it has added through recent acquisitions and investments in its teams.

“The common thread to these work streams is that they put the consumer at the center,” said Parker. “They are all designed to reduce friction and create a more direct connection with our customers and ultimately invite them to become members. Membership is the sharp point of our growth.”

The Nike app at retail, for example, allows members inside physical stores to unlock tailored offers based on their past engagement with NIKE and shop at their pace on the retail floor, scanning products for information and checking out on their own, Parker said. Members can also reserve product online and have it waiting for them at their nearest store. If they can't a find product they want, new investments in RFID will enable the consumer to instantly track another one down somewhere else in the store, online or potentially in another retail partner’s channel.

“Nike's not only deeply committed to using our digital advantage to make the consumer experience better, we're also using data science to inform how much product we supply and where,” said Parker. “Through our acquisition of Celect, we're applying and developing new unique algorithms to make us better attuned to what the consumer is telling us. We're leveraging data that includes past and present consumer interest in products and purchasing signals to better predict demand, so we can decide how to stage inventory in our distribution centers and our stores in different ways.”

The acquisition accelerates Nike’s ability to better predict the right supply of products down to the style, color and size, Campion explained further. It also brings other tools that improve pricing and mark down efficiency.

Campion noted Nike’s digital transformation is beginning to impact its results.

“Our constant currency revenue growth and margin expansion excluding foreign exchange headwinds over the past two years has exceeded the financial model we communicated at our Investor Day,” he said. “And we believe that building on our digital advantage is certain to further extend NIKE's lead and amplify our long-term growth potential.