Jun 30, 2017
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Nike posts higher-than-expected 4Q revenue, inks Amazon collection deal

Jun 30, 2017

Somewhat eclipsed by its German competitors lately, at least in millennial marketing coups, the U.S. sports giant Nike Inc. proved in its 4th-quarter and 2017 financial results on Thursday that business is indeed brisk. The sportswear mogul confirmed it would also launch a pilot programme with fellow giant Amazon.com Inc to sell a limited product assortment on its website.

Nike - Nike

Nike's comments confirmed an earlier report, which said the footwear maker was seeking to directly sell its products on Amazon, rather than through third-party and unlicensed dealers.

"We're looking for ways to improve the Nike consumer experience on Amazon by elevating the way the brand is presented and increasing the quality of product storytelling," Nike Chief Executive Mark Parker said on a post-earnings call.

Nike executives emphasized that the Amazon venture was just one part of a strategy that also includes more direct-selling presence through Nike's own website and mobile application.

"It is really a small pilot," Nike brand president Trevor Edwards said of Amazon on a conference call with analysts. "It's just the start. As we continue to work with them and we see success, we will see how we can scale it."

Investment bank Canaccord Genuity said Nike was most likely to sell on Amazon "mid-tier" products and would not risk its relationships  premium distribution channels such as the Foot Locker chain.

"We have and continue to give Nike credit for being the best in retail at segmenting," Canaccord Genuity said in a note last week. 

"To that end, we suspect that it will work hard to keep the lines between its tiers of distribution distinctly drawn."

Goldman Sachs described gaining control of presentation on Amazon as an "operational imperative" for Nike to better manage goods and protect higher-margin items that could otherwise be affected by outside platforms.

Nike executives side-stepped questions on details about the products going on Amazon, including whether it would include the popular Michael Jordan sneakers, or whether the goods would be "mid-tier" or "premium."

The  world's largest footwear maker also reported quarterly revenue and profit that topped Street estimates as the company kept a lid on costs and saw greater demand in Western Europe, China and emerging markets.

Revenue rose 5.3 percent to $8.68 billion for the fourth quarter Analysts on average had expected revenue of $8.63 billion, according to Thomson Reuters I/B/E/S.  

​“Nike continues to create both near-term wins in today’s dynamic environment and a lasting foundation for future growth,” said Parker, in a statement. “Through our Consumer Direct Offense, we’re putting even more firepower behind our greatest opportunities in Fiscal 2018. It will be a big year for NIKE innovation and we’ll bring those stories to life through deeper consumer connections in our key cities around the world.”

By brand segments, Nike's namesake brand was up 7 percent for the fourth quarter, totaling $8.1 billion, powered by growth in markets outside the U.S. as well as in its sportswear and running categories. Converse revenues increased 10 percent to $554 million.

Net income for the quarter increased 19 percent to $1.0 billion, which the company attributed to global revenue growth, lower selling and administrative expense and a lower tax rate, all slightly offset by a gross margin decline.

Nike's sales in Greater China jumped 11 percent for the reporting quarter. In China, the company has revamped stores and increased online efforts in a bid to reinvigorate demand in the world's No. 2 economy.

The company's selling, general and administrative expenses fell 4 percent to $2.7 billion.
Sales in Western Europe, Nike's second-largest market, were up 4 percent in the fourth quarter ended May 31.

For Fiscal Year 2017, the sports giant reported revenues up 6 percent to $34.4 billion for the year. The year was buoyed by growth in all regions as well as the Jordan Brand, sportswear and running. Wholesale revenues of the Nike brand increased 5 percent while direct-to-consumer sales spiked a whole 18 percent, thanks in part to a 30 percent increase in e-commerce sales. 

Nike could also boast of an expansion to its store network, now totaling 985 retail stores compared to 919 at the end of fiscal 2016.

Shares of the Dow component were up nearly 3 percent at $54.67 in after-market trading on Thursday.

In the face of intense competition in North America and to promote its core brands such as ZoomX, Air VaporMax and Nike React, the company earlier in June said it would cut 2 percent of its global workforce and trim a quarter of its shoe styles as it looks to become nimbler.

Excluding certain items Nike earned 60 cents per share, well ahead of analysts' average estimate of 50 cents.

With additional reporting by Reuters and AFP

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