Even Nike, often lauded as one of the strongest global brands in the retail industry, is taking a hit from the coronavirus pandemic.
The Portland, Oregon-based sneaker maker on Thursday reported an unexpected quarterly net loss and a sales decline of 38% year-over-year, as its business was hurt from its stores being shut temporarily, and online revenue was not enough to make up for that.
Its inventories also piled up, weighing on profits, as its wholesale partners such as department stores also had their shops shut and took in fewer orders for shoes and clothes.
Nike shares were recently down around 4% in after-hours trading.
Here’s how Nike did during its fiscal fourth quarter:
- Loss per share: 51 cents
- Revenue: $6.31 billion
Nike reported a loss of $790 million, or 51 cents per share, during the period ended May 31, compared with net income of $989 million, or earnings of 62 cents a share, a year ago.
Total revenue was down 38% to $6.31 billion from $10.18 billion a year ago. Sales in North America were down 46%, while sales in China were down just 3%, with many of Nike’s stores in that region reopening sooner during the pandemic than in the U.S.
Sales at the Converse brand dropped 38%. For the Nike brand, footwear sales fell 35%, apparel was down 42% and equipment revenue tumbled 53%, as sports and many recreational activities have largely been put on hold due to the Covid-19 crisis.
Digital sales soared 75%, representing about 30% of total revenue, as shoppers flocked to Nike’s website for sneakers and workout gear.
But expenses for shipping and returns also put more pressure on the company’s profits. Nike’s margins during its fiscal fourth quarter shrank to 37.3% from 45.5% a year ago.
Analysts were calling for the company to report earnings of 7 cents per share on revenue of $7.32 billion, according to Refinitiv data. However, impact from the coronavirus pandemic makes it difficult to compare the company’s results to analysts’ estimates.
“We are continuing to invest in our biggest opportunities, including a more connected digital marketplace,” Chief Executive John Donahoe said in a statement.
Nike said its inventories as of May 31 amounted to $7.4 billion, up 31% from a year ago. The company said the increase was due, in part, to it shipping less merchandise to its wholesale partners because of the pandemic.
Nike said product shipments to wholesale customers were down nearly 50% during the quarter.
As of Thursday, Nike said roughly 90% of its owned stores are back open globally. In China, it said almost all of its owned stores are reopened. About 85% are open again in North America, it said.
As of Thursday’s market close, Nike shares are down less than 1% this year. The stock is up about 22% from a year ago. Nike is valued at $157.7 billion.