- Nike has moved into the second phase of its marketplace strategy, executives said on a conference call Monday. The retailer has communicated the biggest wholesale pivots to its partners and reduced wholesale accounts by more than 50% over the past four years.
- In pursuit of a direct-to-consumer strategy, Nike will begin testing Jordan-branded stores in North America in fiscal 2023. Chief Financial Officer Matt Friend said it is also using Nike stores to invest in the women's space, and that the company's Nike Live concept is "showing promising levels of productivity per square foot."
- Nike revenue grew 5% to $10.9 billion in the third quarter, on the back of 17% growth in Nike Direct and 22% growth in digital. Nike Direct made up 42% of the retailer's sales in the quarter, reaching $4.6 billion, according to a company press release.
As Nike accelerated its DTC growth, the brand has moved away from select wholesale partners, pulling out entirely from some and cutting back on others. About a month ago, Foot Locker said its amount of Nike product would "decline meaningfully" as a result of Nike's DTC strategy and Foot Locker's own goals.
On its earnings call Monday, Nike continued to tout its DTC strategy, but also sought to emphasize that wholesale was still a significant part of the company's business. CEO John Donahoe said the company would continue to make strategic deals with its wholesale partners, including combining loyalty programs with key partners like it did with Dick's late last year.
"Our wholesale partners continue to play a very important role in our marketplace strategy," Donahoe said.
In discussing Foot Locker specifically, Donahoe said Foot Locker "always has been and always will be a large and important partner of Nike's." The company will play a "distinct role" in Nike's strategy going forward, particularly in basketball and sneaker culture, as well as kids.
"We have been editing our account portfolio and at this point in time, we have made the edits and communicated those edits to our partners," Friend said of the retailer's pullback from wholesale. "We're focused now on driving growth through our remaining wholesale partners."
Although emphasizing DTC channels has been central to Nike's growth strategy, not all analysts are convinced the strategy boosts margins. In emailed comments, BMO Capital Markets analysts led by Simeon Siegel noted that while Nike saw growth in DTC penetration in the quarter, EBIT margins declined.
"Bottom line: We believe margins may be improved by scale and profit-focused initiatives, not by a shift to Direct," the analysts wrote.