Nike FY Numbers - Online Sales Surge

The most prominent athletic brand, Nike, reported its quarterly numbers for the fourth quarter ending in May. As expected the numbers were hard hit by the pandemic. The Portland, Oregon-based sneaker and athleisure giant reported a larger loss than expected.

Nike reported revenues of $6.31 billion (lowest level of revenue since 2013), a 38% decline from a year earlier which led to a loss of $790 million. North American revenues were down 46%, while in China they were only down 3%. Online sales surged by 75%, representing almost 30% of the total revenues, a milestone they had expected to only reach by 2023.

Nike's customers were buying workout gear and running sneakers online like never before as they chose to use the additional time provided by lockdown to stay fit; or to be comfortable as they work-from-home. Costs associated with delivery, cancellations and returns also surged, chipping away from Nike's margins which shrank to 37.3% from 45.5% a year ago. These are the worst margins seen since 1998.

Considering the fact that retail sales in the US fell 87% in April and 63% in May on a year-on-year basis, Nike has shown resilience by converting a lot of its sales to online. Nike learnt from its Chinese business on how to navigate the pandemic by making wholesale inventory e-commerce ready which gave it a leg up in North America and Europe. Meaning things could've been much worse.

The summer Olympics has been postponed to 2021, so Nike will see a boost next year from the event. The pandemic has erased a lot of income from many households, meaning consumer demand will be muted, but in the retail apparel sector, Nike will show a strong recovery.