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Nike Posts Surprise Loss Reported By Nike Due To Pandemic Hit, Online Sale Grows


06/26/2020


Nike Posts Surprise Loss Reported By Nike Due To Pandemic Hit, Online Sale Grows
Markets were in for a surprise when the sport apparel company Nike reported a loss for the latest completed quarter which was a first quarterly loss for the company in over two years. 
 
The company said that its business was affected significantly by the closure of its department and retail stores globally because of the novel coronavirus pandemic related restrictions. 
 
The shares of the company dropped by about 4 per cent after the surprise results were declared by the company. 
 
The crisis of the pandemic however has brought to a complete halt its wholesale business which is engaged in selling its merchandise to other retailers. That caused a reduction in shipments by 50 per cent as well as an increase in the company’s inventory and higher costs to the company because of cancellation of orders.
 
These additional costs dragged down the gross margin by 820 basis points during the fourth quarter of the company’s financial year at a time when the pandemic had forced closure of company-owned stores and other retailers for almost eight weeks at a stretch throughout the world.
 
On the other hand, the online sale channel of the company, in which Nike has been investing significantly for years now, recorded a growth in sale of 75 per cent as many consumers purchased activewear and sneakers while they stayed back home because of the stay at home orders by governments all throughout the world imposed to prevent the spread of the pandemic.
 
Increasing its online presence was now the focus of the company, said Nike Chief Executive Officer John Donahoe while discussing the results with analysts, and added that the company now expects its overall business to reach 50 per cent digital penetration. During the latest completed quarter, about 30 per cent of total revenue of the company was accounted for by its online sales.
 
"COVID-19 has shown that our strategy is sound," Donahoe said.
 
Nike has now managed ot open up all its stores in China where the novel coronavirus first emerged and later spread throughout the world. There was however a drop of 3 per cent in revenues in the Greater China region. There was a 47 per cent drop in revenues from Nike’s North American business.
 
The brand of Nike is still strong and the numbers in China reflects what the company should expect in its western markets including in the United States after things get normal there, said Forrester Research retail analyst Sucharita Kodali. “It's not financially distressed ... It does not have the problems of other companies in retail,” she said
 
Nike's net loss came in at 51 cents per share and revenue fell 38% to $6.31 billion. According to IBES data from Refinitiv, analysts were expecting a profit of 7 cents per share against revenue of $7.32 billion.
 
(Source:www.businessworld.in)