- After struggling with closures in Vietnam, all of Nike's factories in the country are currently operational and Nike has returned to 80% of its weekly production volume pre-closure, Chief Financial Officer Matt Friend said on a call with analysts discussing the retailer's second quarter results.
- As a result of three months of closures and limited production volume as it ramped back up its factories, Nike had to cancel 130 million units, Friend added. Despite the challenges, the company's net revenue in Q2 edged up 1% to $11.4 billion while net income grew 7% to $1.3 billion.
- Growth of digital and DTC channels continued, with digital rising 40% in the quarter in North America. Nike Digital now makes up 25% of Nike's total brand revenue, up three percentage points from the previous year.
With factories reopening and ramping back up in Vietnam, Nike's attention is once again on its DTC strategy. The plan, which includes cutting back on wholesale partners and prioritizing its own stores and digital channels, has made meaningful progress over the past few years. Specifically, over the past four years, Nike's North America wholesale accounts have declined by about 50%, Friend said, while DTC and digital continue to grow.
"Despite a tough compare to 30% growth [last year], the DTC grew a solid +8%, which would have been even stronger if not for a -21% decline in China," Wedbush analysts led by Tom Nikic said in emailed comments. "Furthermore, the Digital business was up 11%, despite an extremely difficult 80% compare to [last year]. The focus on DTC is made extra clear by the 6% decrease in wholesale sales, which they attributed to 'inventory optimization' amid the supply chain disruption (meaning that they prioritized DTC over wholesale when supply was tight)."
Nike's shift to DTC leaves room for some key wholesale partners, including Dick's Sporting Goods, which Nike recently integrated its loyalty program with. Tying the two rewards programs together allows Nike to maintain its direct relationship with customers and serve them "in a more personalized, engaging and sustainable way," CEO John Donahoe said on the call. More broadly, Nike's emphasis on digital makes it "one of the few brands that can directly connect with and serve consumers at scale," Donahoe said.
As the retailer expands its reach, it's also continuing to gain market share, according to J.P. Morgan analysts led by Matthew Boss.
"[Nike] solidified the #1 position within global apparel & footwear this year (+0.5 points vs. 2019 to 3.3% share), while the #2 player [Adidas] maintained 2% share (Flat vs. 2019)," the analysts wrote in emailed comments. "Further, [Nike] grew Global Sports Footwear share by +2.5 points vs. 2019 to 25.2% share, widening to a 12 point gap between the #2 player (vs. 9pt gap in 2019), and by region, [Nike] saw the largest step-up in market share within the US Apparel & Footwear category, +1.1 points from 2019 to 6.2% share (#1 share)."