Nike cuts out the middleman

Nike reported its fourth quarter results on Thursday, finishing the fiscal year that ended on May 31 with a flourish. The sportswear giant beat analyst expectations as fourth quarter sales grew 96% compared to the previous year and 21% compared to the fourth quarter of fiscal 2019, which is a better gauge of performance as last year’s May quarter was heavily impacted by COVID-related store closures. Full year revenue was up 19% to $44.5 bln, while net income more than doubled to $5.7 bln. The results were once again driven by strong growth of Nike’s direct-toconsumer business, which saw sales increase by 32% for the full fiscal year, compared to 12% growth in sales to wholesale customers.

The latest results are a continuation of a longer-term trend that sees Nike, like other industry heavyweights, cut out the middle man and move more and more towards selling directly to consumers, at the expense of traditional retailers. The percentage of direct-to-consumer sales in total Nike brand sales more than doubled over the past decade, climbing from 15% in 2010 to 39% in fiscal year 2021. Direct-to-consumer sales grew six-fold, from $2.5 bln in 2010 to $16.4 bln in 2021. The steep increase in direct sales is largely driven by sales across Nike’s digital platforms, which accounted for 21% of Nike brand sales last year.

Now approaching 40%, Nike aims for direct sales to represent 60% of its business by 2025, with the share of digital direct sales expected to double from 21% to around 40%. Earlier this year, Nike’s largest competitor Adidas had announced a similar initiative called “Own the Game”, under which the German sportswear giant plans to reach 50% direct-to-consumer sales by 2025. (Statista)