(Photo: REUTERS/Ajeng Dinar Ulfiana/File Photo GLOBAL BUSINESS WEEK AHEAD)
Even Nike -- often considered as one of the most influential brands in the global retail sector -- is taking a major beating from the ongoing global health disaster.
The Portland, Oregon-headquartered shoe manufacturer on Thursday posted a shocking quarterly net loss and a year-on-year sales decline of 38 percent as the business reels from temporary closures of its shops, and online sales were not enough to cushion its losses.
Nike also piled up its inventories, weighing on profits, as its wholesale partners, such as department stores, also shut down their stores and took fewer orders for sneakers and other apparel.
The iconic brand declared a loss of $790 million in the quarter ending May 31, which equated to a loss of 51 cents a share compared with market analyst projections for nine cents a share in profits. Nike's sales crashed 38 percent to $6.3 billion after huge drops in sales in most of its branches around the globe.
Nike's largest operating region, North America, suffered revenues losses of 46 percent to $2.2 billion. The group disclosed that 90 percent of its stores were shut for around eight weeks during the quarter in three of its four operating locations, with the exception of Greater China.
Despite the massive losses, its digital sales were up 75 percent during the period. Wall Street analysts were expecting a profit of 7 cents a share on $7.32 billion sales, figures from IBES data from Refinitiv, showed.
Nike struggled with the costs of built-up inventory, including wholesale markdowns and cancellations of factory orders. During the time, commodity shipments to wholesale customers dropped by half. Chief Financial Officer Matthew Friend said they expect to be right-sized by the end of the second quarter for its supplies, which climbed 30 percent in the fourth quarter.
In China, where the novel coronavirus was first reported, all of Nike's shops are now back in business. Sales dropped 3 percent in the Greater China geography, while they retreated almost 47 percent in North America. Based on analysis by Forrester Research retail analyst Sucharita Kodali, Nike is still very solid and sales figures in China are a gauge of what to anticipate in western markets and the US as things stabilize.
Nike had previously set a target to hit 30 percent digital reach by 2023. But that timeframe was fast-tracked due to the crisis. Now, the brand stated that it is targeting its e-commerce sales for half of its overall revenues in the near future.
