India men’s team shirt sponsor NIKE lost $790 million in the fourth quarter, as soaring digital sales couldn’t make up for the loss of revenue from locked down stores across the world.
The world’s largest sports apparel maker reported on Thursday (25 June) that its revenue fell 38% to $6.31 billion in the three-month period ending May 31 that was well below the $7.26 billion in revenue expected by Wall Street analysts, according to a survey by Zacks.
The Oregon-based company’s quarterly loss amounted to 51 cents per share. Analysts had expected a profit of 2 cents a share.
Nike said 90% of its stores in North America, Europe, Latin America were closed during the period because of the Covid-19 pandemic. Sales fell 46% in both North America and Europe but just by 3% in China as stores reopened there. Revenue grew 1% in China when accounting for currency fluctuations.
The company grappled with costs associated with reducing built-up inventory, including wholesale markdowns and factory order cancellations. Product shipments to wholesale customers fell 50% during the period. Chief Financial Officer Matthew Friend said the company expects its inventory, which rose 30% in the fourth quarter, to be right-sized by the end of the second quarter.
Nike said about 90% of its directly owned stores are now open worldwide, including all of its stores in China.
A bright spot for Nike throughout the pandemic has been a rise in digital sales, which analysts say positions the company to emerge strongly from the crisis over the long-term. Nike has aggressively invested in its direct-to-consumer digital platforms in the past few years.
Nike and Indian cricket team’s jersey has become synonymous over the last 14 years, but is unlikely to offer the current level of deal when the current deal 4 year deal with the Board of Control for Cricket in India (BCCI) ends in September 2020.
The current 4 Year deal is worth Rs370 Crores ($49.3m), but due to the current economic downturn and continuously plummeting sales, Nike is unlikely to commit the same amount to BCCI for the next cycle. InsideSport the Indian website has learnt from its sources in BCCI, that the brand has already communicated this to the Indian board.
BCCI is likely to seek fresh tenders in case the incumbent fails to match the current offer.
John Stephenson
john@cricketinvestor.co.uk
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