Nike’s D2C Dominance Continues To Drive Performance

Nike remains bullish on the growth of its digital and direct-to-consumer (D2C) business, executives told investors Thursday (June 24), projecting that digital will account for 50 percent of the sports apparel company’s business by 2025.

The combination of owned and partner digital revenue is currently about 35 percent of Nike’s total business, which President and CEO John Donahoe said is three years earlier than the company’s prior plans.

“We’re supercharging how we serve consumers with convenience, innovation, content and service,” Donahoe said. “This is how we stay ahead of the pack and expand our lead.”

Nike’s digital business more than doubled compared to the 2019 fiscal year, growing to $9 billion. Even as physical stores reopened over the past several months, the Oregon-based company saw a 37 percent growth in its digital business over the prior year, when most people’s only, or safest, option for shopping was online.

App Advantage

Donahoe said Nike’s suite of apps, including SNKRS, accounted for 40 percent of the company’s digital business in the fourth quarter, another sign that the company’s bet on D2C is working. SNKRS grew over 90 percent in demand and saw nearly 80 percent growth in monthly active users in the fourth quarter.

“We are going to be one of the very few apps that have a direct connection with consumers,” the CEO said. “And that’s unlocking great growth, that’s unlocking growth in our ability to serve them with more personalized shopping experiences.”

The $211 billion company’s stock has underperformed the S&P 500 over the past year, with its shares falling nearly 5 percent since Jan. 1, but that didn’t sway Nike’s optimism about the future or investors, who bid-up shares of Nike by more than 10 percent in after-hours trading.

CFO Matt Friend said he expects strong revenue growth going forward, based on “the significant market opportunity that we see … as well as our accelerated shift to a more direct member-centric business model.”

“We’re on the offense,” Friend added, “and accelerating our strategy to serve more consumers personally and at scale.”

At the same time, Donahoe also noted that Nike now has over 300 million customers in its membership program, hitting the company’s goal for the program a full year early.

“Knowing and serving our members drives greater competitive separation,” he said, adding that the program allows Nike to more quickly respond to consumer demand for innovation.

Growth Opportunities

In addition to consumers returning to clothing stores in numbers not seen before the pandemic, Nike, understandably, is also excited about the return of sport and next month’s Olympics in Tokyo.

In the next several weeks, Nike expects to launch more of its Olympic product line, ahead of the July 23 opening ceremony, and Donahoe said he’s been excited by the demand for Olympic products so far.

The company also is continuing to make a more direct play for the world’s up-and-coming consumers, with last month’s Play New campaign on TikTok and Snapchat attempting to get Generation Z to “just do it.” Utilizing the apps’ augmented reality lenses to promote activities such as yoga, dance and surfing, Donahoe said Nike saw over 600 million impressions in the first two weeks alone.

“Our goal isn’t merely to take market share,” he said. “Our goal is also to grow the entire market … [and] by inspiring people to try something for the first time, we vastly expand the community of athletes.”

One area of particularly strong growth, Donahoe and Friend noted, is women’s products. Friend said Nike expects its women’s products to outpace other parts of the business; in the past year, the company’s women’s business drove outsized year-over-year growth of 22 percent, a pattern that Friend and Donahoe said they expect to continue.

For example, he said, Nike Live stores offer personalized experiences and services for female consumers, and almost 50 percent of sales at those stores are for women’s products.

“We know that there is even greater growth ahead as [we] invest far more resources in serving women end-to-end,” Donahoe said.