Nike on Thursday reported a second quarter revenue increase of 10% (13% currency neutral), to $10.3 billion, according to a company press release. By brand, Nike revenues were $9.8 billion, up 10% (12% currency neutral) thanks to wholesale and Nike Direct growth, as well as sportswear, running and the Jordan brand; Converse revenues were up 13% (15% currency neutral) to $480 million.
Net income in the quarter increased 32% to $1.1 billion, driven by revenue growth and gross margin expansion, among other things. Gross margin was up 20 basis points to 44%, thanks to higher average selling prices and margin expansion in Nike Direct and Converse, according to the release.
North America revenue grew 5% to $3.98 billion, and apparel grew 8% (10% currency neutral) in the quarter. The Jordan brand also recorded its first billion-dollar quarter, which outgoing CEO Mark Parker called "an incredible milestone," according to a company transcript.
For his last quarter at the helm of Nike, Parker went out with a bang.
The athletics brand highlighted two Nike Live locations opened in the quarter, in Long Beach, California, and Tokyo, as well as digital sales growth of 38%, in part thanks to the Nike and SNKRS apps, which are now live in more than 20 countries and are "outperforming all other channels," according to Parker.
That strength in digital translated to Black Friday, where digital sales grew 70% in North America, breaking records for the company, including "our highest week of member engagement ever."
In the past, executives have said that digital has the potential to be the majority of the brand's business, and selling direct to consumer is a large piece of that plan. Chief Financial Officer Andy Campion noted that Nike Direct grew 17% on a currency-neutral basis in Q2, led by digital.
To that end, this quarter also saw Nike announce its intention to stop selling on Amazon in order to focus on more "distinctive partnerships," presumably with fewer authenticity issues. Parker acknowledged on a call with analysts the need for customers to know they're buying "authentic Nike product from authorized retailers" and that Amazon ultimately didn't fit into its partner mold.
"We have a clear framework for partners in the digital space, and what's guiding us is really to be in the path of the consumer in a way that's really right for the brand," Parker said, according to a Seeking Alpha Transcript.
As Parker prepares to exit the CEO role, he pointed to strong opportunity in apparel, especially as the company continues to grow the Jordan and Converse brands. And with plans for Nike to sell off the Hurley brand, executivess said the move would allow it to "further sharpen Nike's focus."
"We have multiple brands now: Nike, Jordan, Converse. We see tremendous upside potential with those brands," Parker said, adding that developing those brands will help with "taking some of that pressure off of Nike to be everything [to] everybody. I think that's important."
Come Jan. 13, Parker will step into an executive chairman role as John Donahoe, former eBay CEO, takes on the top spot. The announcement, while to some degree expected, came earlier than anticipated, as Parker said in 2018 that he expected to stay in the role beyond 2020.
"I strongly believe the best time to make change is from a position of strength," Parker said of the change. "And our brand and our business are as strong as they've ever been. We're focused, we're competitive, and we're creating a future of our own design."