Nike Inc. executives mentioned the word “sport” 26 times during their Thursday earnings call.
As with all things Nike, everything including the business strategy boils down to a sport reference that no longer seems to be working in rallying the team internally or inspiring the consumer externally.
“We will lead with a sharp focus on sport. That’s why we’re moving to the sport offense,” President and CEO Elliott Hill told analysts on Thursday.
Even still, revenue fell 9 percent to $46.3 billion in the fiscal year ended May 31, driven by declines in the Nike brand, Converse, direct-to-consumer and wholesale. Net income was off 44 percent from the prior year to $3.2 billion.
For the fiscal fourth quarter, companywide revenue fell 11 percent to $11.1 billion with the Nike brand, direct-to-consumer, wholesale and Converse sales down on a year-over-year basis.
The performance was “not up to the Nike standard,” Hill said.
“From here, we expect our business results to improv. It’s time to turn the page,” said Hill, who stepped into the top spot Oct. 14 to lead the company out of its slump.
Investors shrugged off the disappointing quarter, sending Nike shares up about 7 percent in after-hours trading to a recent market cap of $92 billion. They seized on Nike’s game plan to ward off increased tariffs, including shifts in sourcing and working with suppliers and retailers on pricing.
Everything to Everyone?
Nike’s turnaround focuses on five pillars: culture, product, marketing, marketplace and what they say is the ground game. In more specific terms, that means getting the direct-to-consumer business, which had at one time been emphasized as the growth vehicle under a previous regime, to get back to increasing sales. It also means fixing the Air Force 1, Dunk and AJ1 franchises.
Product innovation, such as the now delayed Nike Skims brand, wasn’t center stage Thursday. Instead, executives talked up distribution.
Where not too long ago, Nike was removing itself from Foot Locker and Macy’s, now it’s on a tear getting itself onto store shelves. Executives say they’re making nice with their retail accounts, too.
“A sharp point of view and a less promotional Nike marketplace is helping us gain the confidence of wholesale partners,” Hill said.
The CEO cited as examples Nike’s in-store experiences at Dick’s Sporting Goods for its new 24.7 lifestyle apparel collection and partnering with JD Sports on the Air Max 95.
“The result: elevated presentations, better consumer connections and increased sell-throughs,” Hill offered.
Nike Casts Wide Net in Distribution
As the market waits for the big reveal on the Skims collaboration, Nike is getting into all sorts of female-focused points of distribution.
That includes a deal with retailer Urban Outfitters to be the first brand for its On Rotation in-store experiences. Urban Outfitters, which is facing its own challenges in being relevant, picked its stores in San Diego, Manhattan Beach, Scottsdale, New York and Washington D.C. for the Gen Z-targeted shop-in-shop launch with Nike.
Hill said Nike was the top brand in some of the five doors on opening weekend. He didn’t elaborate beyond that.
There have also been deals with over 200 other “women-led” retail doors, including Aritzia.
It’s a page out of Hoka’s playbook. The performance shoe brand has not only won over the core active consumer but carved a fashionable play for itself at retailers such as Anthropologie and Free People (both owned by the same parent as Urban Outfitters).
And on specialty accounts, Nike said it brought 30 of those partners from around the world to its Beaverton, Oregon headquarters for a four-day retreat to show off future product.
Immediately following the comments about specialty, Hill brought up Amazon—the kryptonite to specialty retailers and just about any other business, including its own Nike Direct.
The company’s new partnership with Amazon begins in the Fall, when the sportswear firm launches a select number of stock-keeping units in footwear, apparel and accessories through a Nike-branded store.
Meanwhile, for its own direct-to-consumer business, Hill said the strategy is all about elevation and creating a “more premium destination.”
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