Can Nike’s coronavirus playbook work for others?
On its third-quarter conference call Tuesday, Nike said its experience managing the COVID-19 pandemic in China has provided an “operational playbook” for “an expedited return to profitable, capital-efficient growth.”
In China, the company’s first steps included closing down about half its stores, significantly reducing hours in others and shifting inventory to serve digital demand.
John Donahoe, Nike’s new CEO, said, “At a time when people were confined to their homes, we moved swiftly to leverage our digital app ecosystem and Nike expert trainer network to inspire and support consumers across China to stay active and connected while at home.”
Weekly active users across Nike activity apps were up 80 percent by the end of Q3 versus at the quarter’s start. Consequently, Chinese consumers’ strong attachment to activity apps translated into strong engagement with Nike’s commerce apps.
Nike’s online sales have been accelerating in the triple-digits in recent weeks and increased more than 30 percent in the quarter, limiting its net decline in China to four percent. The company has begun reopening stores, people are returning to work, traffic is improving and inventory has come down from peak levels.
Nike is using the same playbook in Japan and Korea with both markets seen entering the normalization phase that focuses on balancing consumer demand and supply.
Yet Sam Campion, Nike CFO, cautioned that each country is addressing COVID-19 differently.
As such, the company is reducing fourth-quarter general and administrative expenses vs. the prior-year as part of increased efforts at cost management and is focusing on global demand and supply optimization on a daily basis.
Nike’s distribution will focus on digital in regions facing store closures. In the U.S., the digital push includes a “Play inside” campaign, making the Nike Training Club app accessible free of charge and offering up to 40 percent online discounts, free shipping and 60-day free returns.
Overall, Mr. Campion said year-over-year revenue, margin and the inventory growth rates over the next year “will neither be intuitive nor linear.” He added, “Our measures of success in the near term will be rooted in the amount of inventory on hand, relative to the pace of digital demand, store re-openings and traffic patterns.”
- Nike, Inc. Reports Fiscal 2020 Third Quarter Results – Nike
- Prepared Remarks / Unofficial Transcript – Q3fy20 Nike, Inc. – Nike
DISCUSSION QUESTIONS: What lessons does Nike’s coronavirus playbook offer to retailers and brands? Do you agree that “the amount of inventory on hand, relative to the pace of digital demand, store re-openings and traffic patterns” should be retail’s measure of success in the near-term?