Nike Inc.’s digital revenue increased 22% globally year over year in the fiscal 2021 third quarter ended Feb. 28, 2022. 

Member-only access and app-exclusive releases fueled the increase for Nike Digital — the company’s e-retail spaces like its website and apps — Matt Friend, Nike’s chief financial officer, said during the sportswear brand’s quarterly earnings call March 21, according to a Seeking Alpha transcript. A free membership includes free shipping and returns as well as exclusive products. He also said the Nike app also drove strong demand, and that sales at Nike-owned stores grew 14% compared with the year-ago quarter, with significant improvements in traffic during the quarter.

Total third-quarter revenue was $10.9 billion, up 5% from $10.36 billion during the comparable quarter of the prior year.

Nike is No. 10 in the 2021 Digital Commerce 360 Top 1000.

CEO Jack Donahoe said Nike Direct’s sales led the quarter’s 5% growth. Nike Direct refers to the company’s direct-to-consumer channels like its stores and digital platforms, which include its apps. Its sales were up 15%, or $4.6 billion. Nike brand’s digital sales grew 19% in the third quarter, led by 33% growth in North America. 

“The Nike mobile app was up more than 50% in the quarter and overtook Nike.com on mobile for our highest share of digital demand,” Donahoe said about digital revenue.

Donahoe also said live-streaming remained popular and that Nike began to drop product launches within live streams. This helped quadruple the audience since live-streaming began the previous fiscal year, he said. 

Customers expect Nike to know who they are regardless of channel, online or offline, and across the full array of Nike stores, Nike Digital and wholesale partners, Donahoe said. He emphasized connecting with consumers through the company’s brand portfolio and cited that, along with driving new product innovation and expanding the company’s “digital advantage to create the marketplace of the future,” as reasons for the company’s third-quarter growth.

Brand revenue

Nike brand’s total revenue grew 8% to $10.3 billion compared with the same period the previous fiscal year. Digital accounted for a third of total North American revenue in the third quarter, the highest percentage among all the regions where Nike sells, Friend said.

Nike Digital continues to be the company’s fastest-growing online component, according to Friend. Nike mobile app downloads accelerated, he said, adding that member-buying frequency and average order values (AOV) improved again as the company continued to test member engagement across activity, content, community and commerce. Nike Digital gained 3 percentage points from the same period in FY 2020 and now represents 26% of total Nike brand revenue, Friend said.

Friend said the Jordan brand had record revenue for the quarter in Greater China, but did not provide a figure. This compares with revenue for Converse, which was $567 million, or down 1%. The Converse brand’s revenue was $557 million in Q2, up 16% from the prior quarter, meaning the brand’s sales are up for the fiscal year despite the slight dip in the third quarter.

Supply chain disruption

Despite an overall increase in revenue, Friend said COVID-related lockdowns continued to create challenges for retail traffic. He said in China, Nike-owned stores’ revenue was down 5%, and digital declined 19% because of ongoing supply delays that negatively impacted product launches. 

However, he noted improved conversion rates through Nike’s digital presence and lower customer returns despite having less available inventory in the company’s “most-desired product franchises.” Friend did not disclose conversion rates on the call or figures to compare customer returns to previous quarters.

All factories in Vietnam are operational, with total footwear and apparel production in line with pre-closure volumes and forward-looking demand plans, Friend said.

“Nearly all of our supplier base is operational without restrictions, and we are working closely with our partners around the world to navigate through the most recent risks related to COVID,” Friend said.

He said he expects inventory supply to normalize in Q4, giving the company increased confidence that it’ll have enough supply to meet heightened levels of demand.

“Inventory supply in our geographies is beginning to improve from here,” he added. “Transit times, however, remain elevated. And in the case of North America, transit times in the third quarter have worsened.”

The company has taken actions to address these challenges, he said, and to protect against lead times increasing even further. He did not specify what auctions the company is taking. But he did say the company has moved up buying times to accommodate for longer transit times and “ensure the right assortment of products arrive on time for the fall selling season.”

“Nike-owned inventory levels increased 22% versus the prior year, with in-transit inventory now representing 65% of total inventory at the end of the quarter,” he said. “Transit times are now more than six weeks longer than pre-pandemic levels and two weeks longer than the same period in the prior year.”

For its fiscal third quarter ended Feb. 28, 2022, Nike reported:

• Total revenue increased 5% to $10.87 billion compared with the previous fiscal quarter ($10.36 billion).
• Nike Direct sales were $4.6 billion, up 15% from $3.91 billion a year earlier.
• Nike-brand digital sales increased 22%, led by 33% growth in North America.

For the nine months ended Feb. 28, 2022, Nike reported:

• Total revenue increased 8% to $34.48 billion globally from $32.19 billion in FY 2020’s comparable period.
• Revenue in North America increased 9% to $13.24 billion from $11.795 billion the prior fiscal year’s comparable period.
• Revenue in Greater China decreased 8% to $5.99 billion from $6.36 billion the prior fiscal year’s comparable period.

Percentage changes may not align exactly with dollar figures due to rounding.

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