This week Nike, the U.S. athletics giant, revealed its Q1 2020 earnings. It took the market by surprise as the new Nike, the digital one, delivered much more than expected.
The market expected $9.11 billion in revenue, but Nike delivered $10.59 billion. Moreover, it reported double EPS as expected – $0.95 when compared to $0.47. At the same time, inventory remained relatively stable at $6.7 billion when compared to $6 billion expected.
While the company continues to see year on year declines in physical retail traffic, its digital presence makes the most of its outstanding results. The outcome? Nike shares opened at a new all-time high following the results.
Digital Reaching 30% of Total Nike Sales
Nike’s digital acceleration is responsible for the outstanding results in its first fiscal quarter of the year. Digital sales grew by 80%, reflecting an agile company that adapted extremely well to the disruptions caused by the pandemic.
However, the results reflect the work for the past several years, as traditional retail stores struggle for quite some time to keep up with the advances in the digital space. Also, Nike attributes much of its success to the consumer-led digital transformation – basically, the company recognizing that it adapted to the consumer needs.
During the quarter Nike kept over 90% of its physical stores open throughout the world, but the decline in sales continued. It comes as no surprise as people were forced to remain indoors, as many countries were in full or limited lockdown, and tourism was also prohibited.
What is impressive to Nike’s results is that this is a growth company. This is not a tech-driven company that experienced a rise in revenue due to consumer behavior changes. The end product is designed to be used outdoors mostly – this is a manufacturing company that just happened to excel in inventory management, marketing, and its ability to quickly adapt to exogenous factors.
The future looks bright, both from a short to medium and long-term perspective. The holiday shopping season is just around the corner, and Nike expects a sharp increase in revenue during the months ahead. On the medium to long-term perspective, the ability to deliver such a strong quarter in the midst of the pandemic tells the story of a company that believes in its product and mission.
As it turns out, “Just do it” is not just a slogan. At Nike, it is the way of running a profitable business.