Nike Has Reported Heavy Losses Due to the Coronavirus Crisis

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(Newswire.net — July 2, 2020) — The coronavirus pandemic has shaken the foundation of the economy, and Nike has been no exception. One of the strongest retails brands in the world, Nike reported losses in sales and net revenue. 

Just how much losses are we talking about?

According to reports of sites such as Sneakers Love Portugal, in its fiscal fourth quarter, Nike has made a loss in its shares that amount to 51 cents. Its revenue at the time was reported to be 6.31 billion in US dollars. While this appears to be a significant number, especially considering the current economic strain, this is a massive loss for a big brand like Nike.

One year ago, Nike’s total revenue was 10.18 billion dollars. This year’s revenue amount is a 38% year to year drop in sales. Also, the brand’s net earnings were 989 million dollars. By the end of May this year, its revenues had dropped by 790 million dollars.  

Its margin has also shrunk to 37.3%. Last year it was at 45.5%. 

Why couldn’t Nike escape the effects of the pandemic?

Following the complete shutdown of normal lifestyles and businesses, Nike was forced to close its stores temporarily. Department stores, often operating as Nike’s wholesale partners, were also closed. 

Besides, those that could only took a small portion of their usual clothes and shoe orders. As a result, there was a pile-up of inventories, which ultimately put a strain on the profits typically made by the business. 

One other factor that contributed to the losses was the increase in online sales. While this was good for the business, Nike did not anticipate the influx of shipping costs and the cost of returns. 

Besides, online revenues weren’t sufficient to cater to the losses that resulted from store closures. 

There is hope!

One undeniable truth discovered during this period is the potential that digital sales have today. While stores were losing sales, Nike’s digital sales increased by 75%. The amount represented 30% of the entire revenue Nike made in its fiscal year. 

Now, the pandemic seems to have accelerated Nike’s timeline to go digital with its sales since most of its consumers flocked to the website to buy workout gear and sneakers. Nike wanted to penetrate the digital world of sales by 2023. 

However, the global brand is now working towards making digital sales account for half of its entire revenue stream by increasing its e-commerce. Chief Executive John Donahoe said in a statement that Nike is currently working on building a more connected digital market.

Looking to the future

We might be looking at a future where online business is at the center of everything Nike is doing. The company is investing in significant opportunities. To that effect, they plan to open smaller format stores to be used as pick up locations for online shoppers. 

Nike plans to open 150 stores in different locations all over the world. It is true; consumers now resonate perfectly with seamless and modern experiences, and Nike is making sure that they strengthen their foothold by offering services that cater to their customer’s preferences.