Nike Fights Growing Coronavirus Outbreak With China Playbook in Hand

    • Nike reported $10.1 billion in revenue in its fiscal third quarter.
    • The company’s run of 22 consecutive profitable quarters in China comes to an end, down 4% in Q3.

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Nike reported better than anticipated financial results for its fiscal third quarter, amid a global health crisis that stands to negatively impact key company markets in North America and Europe in the coming months. 

The shoe and apparel maker generated revenue of $10.1 billion for the period starting December 1 and ending February 29, up 7% year-over-year on a currency-neutral basis. However, net income fell 23% to $847 million, primarily resulting from the global coronavirus pandemic.

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While a majority of Nike’s business segments improved sales in the third quarter, business in China told a different story.

Nike’s run of 22 consecutive positive quarters in the country is over after sales declined 4% in the period. At the peak of the coronavirus outbreak in China in January, Nike closed 75% or roughly 5,000 company-owned and partner stores, with remaining locations operating on reduced hours. 

“Retail volume in China plummeted, so we leveraged our digital capabilities to shift inventory to meet digital demand,” CEO John Donahoe said on the company’s earnings call with investors Tuesday.

Nike’s e-commerce sales jumped 30% in China in the third quarter, as the company relied on marketing in-home workouts and products to quarantined consumers to recover sales. Nearly 80% of Greater China stores are now open to the public. Foot traffic has subsequently increased double-digits since locations reopened 30 days ago.

“It’s a challenging period now for the U.S. and Europe. But with our experience in China, Japan, and South Korea, we will see the other side of this crisis,” Donahoe said. “We now have a playbook to use outside of China.”

That playbook will again rely on closing stores for safety, reducing staff at distribution centers while practicing social distancing, and tapping into consumers’ workout routines at home. 

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Nike launched a new digital marketing campaign on March 21 in the U.S. and Europe, encouraging consumers looking to remain active to do so at home. The Oregon-based company has also made its premium Nike Training Club app available for free to consumers. 

Nike North American sales in the third quarter improved 4%, led by footwear sales of $2.6 billion. The company’s European, Middle East & Africa regions also grew sales by 11% to $2.4 billion. Results in the quarter outpaced fourth-quarter output provided by archrival Adidas, which reported year-end results on March 11. 

Nike declined to offer fiscal fourth-quarter guidance amid coronavirus uncertainty in select markets. The retail brand has closed multiple stores across North America and Europe in response to the coronavirus outbreak.

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Asked by analysts how the postponements of key sporting events – most recently the Olympics – will impact Nike’s upcoming product rollouts, Donahoe said that the changes made to events do not prevent Nike from releasing new products on its own schedule. 

“Obviously, the world of organized sports has put things on hold,” Donahoe said. “They are doing what’s appropriate for athletes and fans, and we are supportive of that. We look forward to sports being up and running [again], and we will be there.”