GLOBAL shoe giant Nike just released its financial report for its fiscal fourth quarter (that is, covering the months of March, April, and May), and the results were not pretty.
With the novel coronavirus forcing worldwide shutdowns of shoe stores, Nike reported a loss of $790 million. Compare that to their performance in the same period a year ago, when the Swoosh brand earned $989 million.
Total sales dropped by 38 percent year-over-year.
For Nike, footwear sales dropped 35 percent, apparel was down by 42 percent, while equipment sales registered the lowest dip at 53 percent. Subsidiary brand Converse also reported a 38 percent loss in sales.
Nike was able to rake in a total revenue of $6.31 billion, compared to $10.18 billion from the year before. However, inventory and shipping costs cut deeply into their earnings, as shoes stagnated in warehouses and Nike struggled to fulfill their rising digital orders.
Digital seemed to be the one bright spot in the company’s report, as the brand reported a 75% increase in online sales.
“We are continuing to invest in our biggest opportunities, including a more connected digital marketplace,” said Nike CEO John Donahoe in a statement.
In a call to analysts, he further explained: “Consumers want modern, seamless experiences, online-to-offline, so we’re accelerating our approach.”
The growth of their online business is a vindication of their four-step COVID-19 business strategy, unveiled during the release of their last financial report on March.
But rising digital sales and the reopening of China stores could not offset Nike’s losses.
The brand laid the blame squarely on the COVID-19 pandemic. Ninety percent of Nike-owned stores in North America, Europe, the Middle East, and the Asia Pacific region were closed for around eight weeks, said the brand.
In addition, wholesale partners — department stores, shoe retailers, and the like — were also closed during this period, so shoes remained unshipped, resulting in a 31 percent increase in inventory compared to last year.
Because China was able to reopen sooner than other markets, it only suffered a 3 percent loss in sales, compared to, say, North America, which reported a 46 percent drop.
Nike shares tumbled by 4 percent as a result of the report.
In addition, Complex is reporting that John Donahoe has sent a company-wide email to all Nike employees, warning them of impending layoffs.
Nike, the CEO said, will have to make difficult choices that will “likely result in a net reduction of jobs.”
In the email, which Complex viewed, Donahoe justified the layoffs not as cost reductions, but as a way to restructure the company’s “overburdened matrix” and make the company even leaner and more responsive to business challenges.
The CEO admitted in the email that Nike could not yet say “how many jobs will be reduced, nor who will be specifically impacted.”