Recently, Nike announced that it will lay off employees in two batches, in July (this month) and in the fall. According to U.S. Securities and Exchange Commission (SEC) filings, Nike has 76,700 employees, but it is unclear how many people will be affected.
Recently, Nike announced that it will lay off employees in two batches, in July (this month) and fall.
According to the U.S. Securities and Exchange Commission (SEC) filings, Nike has 76,700 employees, but it is unclear how many people will be affected.
Nike said: “We are committed to maintaining company values, legal obligations, and competitiveness through thoughtful and robust layoff practices and showing compassion and respect for laid-off employees. It is consistent with the fierce market and the personal situation of employees.”
NIKE also said in another statement: “We will build a more lean company, quickly transform and adapt to the future market. The company is shifting internally Resources, hoping to invest funds in high-potential areas.”
As for Baocheng in the supply chain of the Taiwanese factory, the legal person believes that Nike accounts for about 30% of the revenue of the shoemaking business. The shoemaking business is expected to continue to adjust. Shipments of finished shoes are expected to decline by 20 to 30% in the second quarter, and will continue to adjust into the third quarter. The decline is expected to narrow in the fourth quarter.
The legal person conservatively estimates that Baocheng shoemaking shipments in 2020 will decline by 17.34% compared with 2019.
For Baihe, the legal person believes that Nike accounts for about 20% of revenue. It is estimated that traditional business revenue will decline by about 20 to 30% in the second quarter. After adding in the contribution of real estate , revenue will decline slightly in the second quarter.
Rare failure to meet profit expectations
On June 26, Nike released its fourth quarter results for fiscal year 2020 (the period is from March to May). The reporting period coincided with the peak of the epidemic in Europe and the United States. Nike achieved operating income of US$37.403 billion, a year-on-year decrease of 4 %. In the fourth fiscal quarter of fiscal year 2020 as of the end of May, Nike’s operating income reached US$6.313 billion, lower than the expected US$7.38 billion, a year-on-year decrease of 38.14%, and a quarterly net loss of US$790 million (approximately 5.6 billion yuan), a year-on-year decline. 179.88%.
CNBC pointed out that this is very rare for Nike-because in the past 8 years, the company has only Profit expectations were not met twice.
After the fourth fiscal quarter financial report was released, Nike’s stock price closed down 7.62% on the 26th, with a market value of US$145.7 billion (approximately RMB 1,031.1 billion), a decrease of approximately US$12 billion from the closing price on the 25th, which is roughly equivalent to the total market value of three Heilan Houses (US$3.7 billion). Nike’s stock price has fallen 0.7% this year, while the S&P 500 index has fallen 4.8% during the same period.
At the same time, Nike also disclosed the results of the entire 2019/2020 fiscal year Data: The company’s full-year sales were US$37.4 billion, a year-on-year decrease of 4%; in the first half of the year before the outbreak of the new crown epidemic, sales increased by 9% year-on-year; digital channel sales increased by 47% year-on-year; all market growth reached double digits Gross profit margin was 43.4%, down 1.3 percentage points year-on-year; net profit was US$2.5 billion, and diluted earnings per share was US$1.6, down 36% year-on-year.
As for the decline in fiscal year performance, Nike said that during the epidemic, a large number of offline stores were closed and products from wholesale customers were shipped. A 50% drop in sales volume was the main factor behind the decline in performance.
From a regional perspective, full-year sales in North America, Europe, the Middle East and Africa fell by 1% year-on-year, with North America fell 9%, while Asia Pacific and Latin America edged up 1%. Affected by the epidemic, in the fourth quarter, product gross profit margin dropped 8.2 percentage points year-on-year to 37.3%. Nike said factors for the decline in gross profit margin include rising product and supply chain costs and increased inventory levels.
From different business aspects, due to the impact of the new crown epidemic, sports and many entertainment activities have been largely eliminated. Suspended, Nike’s fourth-quarter footwear sales fell by 35%; apparel revenue fell by 42%; sports equipment revenue fell by 53%; Converse brand sales fell by 38%.
Photo source: Photographed by Zhang Jianjing (data map)
In the new crown epidemic and the United States Affected by large-scale domestic protests, 90% of Nike’s global stores were closed for more than eight weeks in the fourth fiscal quarter. Data shows that as of the end of 2019, Nike had more than 750 stores around the world, including 384 retail stores in the United States. store.
As of the end of May this year, Nike Group had a total of US$12.5 billion in cash, cash equivalents and short-term investments, compared with the same period last year An increase of $4.1 billion.
As for the operating situation in the new fiscal year, Nike said that due to the uncertainty brought by the epidemic to the market prospects, it will not temporarily Guidance on future performance expectations is provided, but inventory levels are expected to return to good conditions in the second quarter of fiscal 2021.
Strong sales in Greater China
It is worth noting that when the global market was hit by the epidemic, Greater China performed best. Excluding the impact of exchange rates, in the fourth fiscal quarter, Nike’s Greater China market revenue increased by 1% year-on-year to US$1.647 billion, making it the only region in the world where Nike has achieved sales growth. Nike Greater China overcame the impact of the epidemic in the second half of fiscal year 2020, and its revenue for the full fiscal year still reached US$6.679 billion, a year-on-year increase of 11% on the basis of constant exchange rates, achieving double-digit growth for six consecutive years; its EBIT reached 2.490 billion US dollars, a year-on-year increase of 5%.
Forrester Research retail analyst Sucharita Kodali pointed out that all Nike stores in China have resumed operations and its sales data in China are still very strong. (robust), as the situation stabilizes, Chinese sales data can be used as an expected indicator after Western and US markets return to normal.
However, as the epidemic situation improves, as of June 25, about 90% of Nike stores around the world have Resumption of business. Among them, about 85% of stores in North America have reopened; about 90% of stores in Europe, Africa and the Middle East have reopened.
Picture source: Photo by reporter Zhang Yun (data map)
The impact of the epidemic on Nike offline Stores have been hit hard, so the next goal is to transfer inventory sales to digital channels. Nike CEO John Donahoe said that this approach has already achieved results in China. Not only on major e-commerce platforms in China, Nike’s own online sales platform is also selling discounts.
On the e-commerce platform, Nike has already started promotional activities for sports brands as early as April and May. Compared with offline, e-commerce platforms have more goods and greater discounts. Nike’s basic models, clearance models and other clothing can be purchased with discounts of less than 100 yuan, so you don’t have to worry about sales.
On June 1st (the first day of June 18), Nike’s turnover exceeded 100 million yuan in just 2 minutes and 59 seconds on Tmall platform alone, which was a breakthrough. The fastest sports brand in billions. Although the sales of 618 are not included in the fourth quarter financial report, we can see the popularity of Nike in Greater China.
In the fourth fiscal quarter, Nike’s online channel sales performed well, with a year-on-year growth of 75%, accounting for 30% of total sales. “Business Times” reported that Nike had previously planned to achieve 30% digital channel penetration by 2023. However, under the influence of the epidemic, this timetable was quickly accelerated. Now its goal is to have e-commerce sales account for 50% of total sales in the near future.
It is worth noting that on the day the results were announced, John Donahoe sent an email to employees to remind them of the upcoming layoffs. Because the company is increasing its efforts to sell products directly to consumers through online and direct retail channels, it plans to further withdraw from traditional wholesale channels that have been hit hard by the epidemic.
CNBC report screenshot
CNBC reported that although the timing of sending this email is sensitive, Nike revealed that the layoffs will not be for the purpose of cost savings.
John Donahoe said in an email that we are building a flatter, more streamlined company, and any resources saved will be reinvested in the highest priorities. The layoffs are expected to occur in two waves: in July and in the fall. It’s unclear how many people will be affected.
U.S. Securities and Exchange Commission (SEC) filings show that Nike has 76,000 employees worldwide. The company noted that it does not expect to be affected by layoffs at its retail store associates, distribution centers and its Air MI manufacturers.
Nike relies on China
Expand” Digital “self-help”
The biggest blow caused by the epidemic to Nike is the surge in inventory.
As of May 31, Nike’s inventory reached US$7.37 billion, a year-on-year increase of 31%, and an increase of more than US$1.7 billion over the same period last year – no more than 10% from previous years. Compared with the growth rate, Nike’s inventory pressure this year can be imagined.
Nike’s most impressive revenue performance comes from online sales, with revenue growing by 75%.
Nike’s self-operated stores in North America, Europe, Africa, the Middle East, Asia-Pacific and Latin America were suspended due to the epidemic, resulting in Nike’s revenue last quarter of US$6.313 billion, a year-on-year decrease of 38%. A decrease of 37.5%. From a regional perspective, all regions have declined by nearly 40%. Among them, China has the best performance, with a decline of only 3%.
Nike stated that in the past few years, Nike has begun to transform its long-term distribution and wholesale model and provide consumers with a better shopping experience by investing in new models. “It is expected that 50% of Nike’s business will be digital. With the help of connected data, inventory and members, we can quickly provide Nike’s best products and services. Realign the business and put members at the center of everything. Expand investment in small, digitally driven stores , such as Nike Live.”
“When the shoes are sold, the relationship with the consumer ends, and the user’s thinking is that the user purchases Before and after, during use, experience, the core is whether all digital strategies can be actively and effectively deployed based on this thinking.” Zhang Qing said.
A report from Oliver Wyman showed that before the epidemic, offline stores of shoes and clothing were already facing pressure. , many clothing brands have begun to slow down their offline expansion or even close stores, and some leading brands have begun to upgrade their offline experience.
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A report from Oliver Wyman showed that before the epidemic, offline stores of shoes and clothing were already facing pressure. , many clothing brands have begun to slow down their offline expansion or even close stores, and some leading brands have begun to upgrade their offline experience.
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