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Nike post losses of US$790m following forced store closures

Nike, lauded as one of the strongest global brands in the retail industry, is taking a hit from the coronavirus pandemic.

The Oregon-based sportswear manufacturer has reported an unexpected loss of US$790 million in the fourth quarter, as soaring online sales could not make up for the loss of revenue from closed stores across most of the world. The sportswear giant saw e-commerce sales rise by 75 per cent, as a result of customers buying from home, but this was not sufficient enough to cover the losses from its physical stores.

Comparing their US$790 million loss to their US$989 million net income from last year, Nike will be eager to reopen all stores in an attempt to regain revenues. Revenues were down 38 per cent to US$6.31 billion from US$10.18 billion from their fourth quarter a year ago. As a result of sport being put on hold and social distancing in place, there has been very little need for new sports equipment and apparel; footwear sales have declined 35 per cent, apparel has fallen 42 per cent and sports equipment, the worst hit section of Nike’s portfolio, has decreased by 53 per cent.

North American sales fell 46 per cent, however, they will be expecting that to rise this quarter with 85 per cent of stores beginning to reopen or already open in the US and 90 per cent globally. However, China only saw a 3 per cent decline, due to the Pandemic peaking a while before it hit the US, as a result, most stores are back open in China and have been for several weeks.

As Nike announced their quarterly losses, CEO John Donahoe, also announced that jobs will be cut but they are not related to the recent losses caused by the pandemic, rather an attempt to restructure. The revenue saved will be used to reinvest into the company.

Nike have not stipulated how many jobs will be cut but have confirmed that retail workers, manufacturing facility workers and distribution centre employees will not be affected by this decision.

After the announcement of the losses and the decision to cut jobs, Nike’s shares fell more than 3 per cent, making a loss of 51 cents per share and Nike now being valued at US$157.7 billion.

In the statement Nike said that “Consumer Direct Acceleration is the next digitally empowered phase of our strategy. We are building a flatter, nimbler company and transforming Nike faster to define the marketplace of the future. We are shifting resources and creating capacity to reinvest in our highest potential areas, and we anticipate our realignment will likely result in a net loss of jobs."

“These decisions are exceptionally difficult because they impact friends and colleagues at Nike. You have my personal commitment that we will put people at the centre throughout this entire process. We will support everyone impacted by this transition."

“We are uniquely positioned to grow and now is the time to build on Nike’s strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”

With digital sales accounting for 30 per cent of total sales, Donahoe has emphasised that digital sales will continue to rise and will eventually represent half of sales, with app registrations doubling this last quarter to 25 million.

Author: Bradleigh Amis