Nike Says Digital Orders Offset Damage to Retail From Coronavirus
March 24 2020 - 7:07PM
Dow Jones News
By Khadeeja Safdar
Nike Inc. said business has rebounded in China following the
outbreak of coronavirus, and the sportswear giant was able to
offset much of its lost retail sales with online orders, a strategy
executives said they expected to follow in the U.S. and Europe.
"We are seeing the other side of the crisis in China," Chief
Executive John Donahoe said on an earnings conference call Tuesday.
"We now have a playbook we can use elsewhere."
Nike sales plunged when many stores in China closed in February
but demand jumped online, Mr. Donahoe said. Roughly 80% of the
7,000 stores that sell its products have reopened in the country.
Nike recently reopened one of its stores in Wuhan, the city where
the outbreak first emerged. He said the company is also seeing
early momentum in South Korea and Japan, two other countries where
the virus prompted temporary store closures.
Shares of Nike, which had tumbled roughly 30% in the past month
along with the broader market, rose 10% in after-hours trading to
$79.55.
The rapidly spreading coronavirus has prompted Nike and dozens
of other retailers to close their stores, governments to limit
travel and many shoppers to stay home. Professional sports leagues
have been suspended and on Tuesday organizers said the Tokyo Summer
Olympics would be postponed.
Mr. Donahoe cited the strategy in China to explain how Nike will
recover sales in other parts of the world. He said Nike closed its
stores in China immediately and doubled down on digital sales as
consumers were confined to their homes. The pivot helped Nike
accelerate sales through its apps and website. Eventually it
reopened stores, foot traffic returned and digital sales remained
strong as well.
"We expect the next several weeks to be a challenging period for
those living in the U.S. and Europe," he said, but the company's
experience in Asia "gives us confidence we will see the other side
of this crisis in the near future."
Mr. Donahoe said Nike would continue to pay its workers during
the store closures. The sneaker giant is also designing personal
protective equipment for doctors and nurses, including face
shields, he said. "This is a moment in society where the private
sector has a major role to play."
Executives said Nike would reopen U.S. and European stores on a
location-by-location basis. They said online orders have surged in
these markets in March as retail stores have shut. Andy Campion,
Nike's finance chief, said online sales in the U.S. this week were
comparable to the peak holiday season.
Nike's latest financial results cover the three months ending
Feb. 29. They capture the economic slowdown in China, where the new
coronavirus first emerged, but not the company's decision to close
on March 16 most of its stores outside China, South Korea and
Japan.
Digital sales rose 36% across the globe, including a 30% gain in
Greater China in the third quarter.
Nike said Greater China sales fell 5.2% to $1.51 billion as a
steep sales decline in February wiped out double-digit growth in
the first two months of the quarter. Overall, the company said,
quarterly sales rose 5% from a year ago to $10.1 billion.
Revenue in Nike's North American market, which accounts for the
majority of total sales, rose 4.4% to $3.98 billion.
Mr. Campion said the company expects Greater China sales to be
flat in the fourth quarter compared with a year ago and are on
track to return to growth in the next fiscal year. Executives said
they wouldn't provide specific financial targets for the fourth
quarter or fiscal 2021.
For its third quarter, the company's profit was $847 million,
down from $1.1 billion a year earlier. The latest results included
a $400 million charge to transfer its Nike brand business in Brazil
and several other South American countries to distribution
deals.
--
Kimberly Chin contributed to this article.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
March 24, 2020 18:52 ET (22:52 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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