Nike shines in online business thanks to investment in digital transformation

Nike has revealed that its fiscal 2022 revenue is estimated to grow by low double-digits and surpass $50 billion driven by its investment in digital transformation.
Nike store with RFIDBeaverton, Oregon-based Nike does not reveal its investment in digital transformation.

Ratnakar Lavu is the company’s first Global Chief Digital Information Officer. Lavu is leading Nike’s global technology functions across the enterprise with responsibility for accelerating new digital capabilities for Nike.

Nike’s selling and administrative expense increased 17 percent to $3.7 billion in Q4.

Nike said demand creation expense was $997 million in Q4, up 21 percent, primarily due to the return of sport and brand events driving increased advertising and marketing expense as well as digital marketing investments.

Nike said operating overhead expense increased 16 percent to $2.7 billion in Q4, due to an increase in wage-related expenses, higher strategic technology investments and Nike Direct variable costs, partially offset by lower bad debt expense.

Nike reported net income of $1.5 billion compared to a net loss of $790 million for the fourth quarter of 2020.

Nike’s selling and administrative expense decreased 1 percent to $13.0 billion for the full year.

Demand creation expense was $3.1 billion for the full year, down 13 percent to prior year, primarily due to lower marketing and advertising expenses for our brand events and retail operations, as well as lower sports marketing expenses as sporting events were postponed due to COVID-19. Nike made investment in digital marketing activities.

DJ van Hameren is the Chief Marketing Officer for overseeing global marketing efforts for Nike.

Gartner marketing research shows 58 percent of customers believe most digital experiences don’t impact their purchase decisions.

“CMOs must rethink their digital experience strategy or risk lack of differentiation and customer impact,” said Kristina LaRocca-Cerrone, Director, Advisory in the Gartner for Marketers practice.

Nike’s revenues were $12.3 billion in fourth quarter year ended May 31, 2021, up 96 percent compared to prior year and up 21 percent compared to the fourth quarter of 2019. Gross margin for the fourth quarter increased 850 basis points to 45.8 percent.

Nike’s full year revenues increased 19 percent to $44.5 billion.

John Donahoe, President and CEO at NIKE, said: “FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace. Fueled by our momentum, we continue to invest in innovation and our digital leadership to set the foundation for NIKE’s long-term growth.”

NIKE Brand Digital delivered strong revenue growth of 41 percent versus prior year and 147 percent compared to the fourth quarter of 2019. North America Digital increased 54 percent versus prior year and 177 percent compared to the fourth quarter of 2019.

Nike’s EMEA Digital fourth quarter sales increased 40 percent, or 170 percent compared to the fourth quarter of 2019. Today, approximately 99 percent of stores in EMEA are open or operating on reduced hours.

“NIKE’s brand momentum is a testament to our authentic consumer connections, digital strength and operational execution,” said Matt Friend, Chief Financial Officer, NIKE, said. “As we advance our consumer-led digital transformation, we are building a new financial model that will continue to fuel long-term sustainable, profitable growth for NIKE.”

Another recent survey by Gartner indicated that CFOs plan to increase technology investments, with 82 percent saying they intend to increase investment in digital capabilities in fiscal year (FY) 2021 compared to FY20.

Alejandra Lozada, senior director analyst in the Gartner Finance practice. “CFOs also view technology as a competitive differentiator that can widen the performance gap between their businesses and those of their peers.”

While CFOs are planning to increase their digital investments, they are less clear on what digital business means and the technologies with the most significant impact on their businesses. This could be a challenge.