Nike, which reported sales revenue of $51.4 billion in fiscal 2024 compared to $51.2 billion in the prior year, has revealed that its digital revenue dropped 3 percent. The drop in its sales from online platforms is more profound as compared with its total sales revenue.
Most of the board of directors at Nike has some digital technology experience. For instance, Apple CEO Timothy Cook is one of the directors at the board of Nike. The iPhone makers’s CEO is a fan of Nike. His favorite products are Nike Air Max 270 and Nike Free Metcon.
But Nike is not doing well in online market place if you consider its performance on digital platforms. A drop of 3 percent in digital sales is significant for the sports and premium sportswear marker. In fiscal 2023, Nike has generated sales revenue of $13.7 billion from digital platforms, Nike annual report 2023 indicated. Nike did not reveal the total size of its e-commerce revenue for fiscal 2024.
Nike has already lowered its spending on technology during the last fiscal. Fans of Nike are convinced that it needs to spend more on story-telling on digital platforms to sell its innovative products in the forthcoming quarters. Nike on Instagram shows it has 305 million fans on the digital platform. Adidas has just 34.4 million fans on its Instagram platform.
Nike says its spending of $12.3 billion towards operating overhead expense did not grow thanks to lower wage related expenses and lower technology spend. Nike did not reveal its total spending on technology focusing on digital transformation.
Fans are not showing strong enthusiasm for purchasing from Nike digital stores though it has increased its spending on advertising and marketing expense. Nike’s demand creation expense rose 6 percent to $4.3 billion. This includes Nike’s spending on digital marketing and digital advertising like social media platforms.
Digital Transformation
The latest IDC report said worldwide spending on Digital Transformation (DX) is forecast to reach almost $4 trillion in 2027. DX investments are projected to grow substantially, reaching or even surpassing two thirds of all Information and Communication Technology (ICT) spending by 2027, says Angela Vacca, senior research manager with IDC’s Data & Analytics Group.
Digital transformation spending by discrete manufacturing will reach half a trillion dollars in 2024, and more than $700 billion in 2027 with omni-experience engagement and sustainability being the strategic priorities, IDC said.
Nike Achievements
Nike has reduced its guidance for fiscal 2025. Three main facts forced John J. Donahoe, President and Chief Executive Officer of Nike, to lower the revenue guidance. Nike has experienced declines in lifestyle though it achieved strong gains in performance product for the fourth quarter. Nike says these declines had a pronounced impact on digital results too.
Nike is using advanced digital tools to quicken development. Nike is leveraging manufacturing partners to speed up product testing and production.
Nike accelerated half a dozen models through this capability. Let us reveal what’s Nike’s Express Lane and Speed Lane.
Nike’s Speed Lane is part of an effort to move faster and be more responsive to the consumer. Nike’s Express Lane enables short-lead-time replenishment and hyperlocal design.
Nike’s Speed Lane will add new innovations including several exciting new franchises across fitness and lifestyle.
What’s happening in digital sales? Nike digital business revenue fell 10 percent in the quarter. Though Nike’s digital business has grown at an approximately 26 percent CAGR since fiscal 2019, Nike missed its Q4 plan on softer traffic, higher promotions, and lower sales of certain classic footwear franchises.
More specifically, these franchises underperformed digital business results in the quarter, especially in April and May, and continuing on into early June.
Nike experienced shifts in consumer traffic in key markets, particularly in Greater China, where brick-and-mortar traffic declined as much as double digits versus the prior year.
Nike is aggressively adjusting forward-looking plans for some of the franchises on Nike Digital, where they have their highest share of business.
During the recent quarterly result, Bob Drbul, Analyst at Guggenheim Partners, shared some relevant questions on Nike’s digital transformation and its impact on revenue and channel mix.
Nike’s digital business has achieved growth over the last four years. “Nike has made the adjustments in forward-looking guidance, and we’ve been more aggressive with it on Nike Digital. We are continuing to improve with the capabilities that we’re building in terms of demand sensing, leveraging data and insights in order to have better predictability of our owned business,” Matthew Friend, Chief Financial Officer of Nike, said.
“Channel mix is driven by consumer demand. We’re embracing a more balanced approach to growing the whole marketplace,” John J. Donahoe said.
Baburajan Kizhakedath
