Nike pledges to ‘stay on the offensive’ as it increases focus on demand creation

Nike’s CFO Matthew Friend has cited the importance of “staying on the offensive” as it looks to capitalise on its direct-to-consumer sales growth.

It comes as the sportswear giant reports a 13% rise in demand creation spend  to $1.1bn (£0.9bn) in the first quarter of its 2024 financial year, primarily due to advertising and marketing expenses.

Speaking to investors on a call last night (28 September), Friend also noted the extensive discounting strategy the company has pursued over the past few years would be less of a focus.

He did acknowledge that consumers are still wary of overspending, though, and therefore are continuing to look for promotions: “We are cautiously planning for modest markdown improvements for the balance of the year, given the promotional environment,” he said.

It follows similar statements made by the company in June. At the time, CEO John Donahoe said he believed the “right focus and attention for Nike is to focus on recovering a higher level of full price growth in fiscal year 2024, profitable growth.”

Nike credits ‘innovation, brand strength and scale’ for DTC success
The latest results show revenues across the Nike business are up 3% to $12.4bn (£10.12bn) led by growth across EMEA, Greater China and Asia Pacific. By contrast, the company reported a decline in North America, both across the wider brand and specifically for its Converse products. Due to a 2% decline in North American sales, overall sales fell just short of expectations despite the strong performance elsewhere.

The brand is confident about its performance for the second half of 2023, though, driven in no small part by expectations around the holiday period. Friend said: “We’re closely monitoring the operating environment, including foreign currency exchange rates, consumer demand over the holiday season, and our second half wholesale order book.” As a result Nike expects overall revenue for the year to be up slightly over 2022.

Nike to move away from promotions in search of ‘profitability recovery’ 

Crucially for the brand, it is continuing to see evidence that its DTC and membership strategy is paying off. Its digital sales increased 2% on a reported basis. Its overall DTC sales were up 6%, compared to wholesale which was flat.

Friend said: “We continue to see that consumers want to connect directly and personally with our brands and in fact, member engagement within our direct business is up double digits versus the prior year with increasing average order values.”

Its direct revenues for the quarter were $5.4bn (£4.4bn), up 6% across all territories.

He specifically called out the “nimbleness” with which physical retail stores had shifted inventory, as a refutation of the claims of operational waste that had depressed its stock price over the course of 2023.