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Tuesday, May 21, 2024

Nike’s Transformative Digital Shift Underway

  • Nike is turning toward digital, both in its sales and media.
  • The company has made recent investments in the metaverse.
Nike-Roblox-Nikeland
Nike/Design: Alex Brooks

Nike is going digital in more ways than one, and market analysts are taking notice.

Robert Drbul of Guggenheim Partners called Nike his “best idea” for 2022 in a Dec. 31 note, saying the shoe and apparel maker “is rapidly embarking on the next era of its company history.” 

The Swoosh has reshaped itself around a trend that has grown quickly in recent years, direct-to-consumer sales, and one that has just begun capturing the public’s imagination, the metaverse.

  • Nike has cut off relationships with numerous retailers while amplifying its own DTC sales, which grew 12% year-over-year in the company’s fiscal second quarter of 2022. 
  • Last month, Nike acquired RTFKT, which produces NFTs, sometimes paired with a physical collectible such as sneakers. It also established virtual real estate within Roblox with Nikeland, an environment in which users can play games and browse products.
  • The company is evaluating $1 billion in media spending in a review expected to last into the spring. 

Strong Fundamentals

“The brand commands dominant market share, which we expect will grow materially from here as digital scales further, new product innovation remains robust, and heavy investment behind key growth drivers continues,” Drbul wrote.

Nike banked $11.4 billion in fiscal Q2 revenue, with the flagship brand accounting for 94.7% of that sum.

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