Nike

Nike is starting to feel the effects of the coronavirus

The Beaverton, Ore.-based activewear retailer reported quarterly earnings Tuesday after the bell, improving on sales, but falling short on profits. 

For the three-month period ending Feb. 29, revenues rose to $10.1 billion, up from $9.6 billion the same time last year. But income was $847 million, down from $1.1 billion the same time last year. 

The company said the decline was driven by key investments, such as a non-recurring $400 million fee to transition Nike brand businesses in Brazil, Argentina, Chile and Uruguay to distribution partnerships. Other expenses included an additional $870 million in creation of “brand moments,” and an 8 percent increase in overhead costs, such as wage-related expenses.  

“In an extraordinarily dynamic time, Nike’s strong results are testament to our deep consumer connections, compelling product innovation and agile teams around the world,” said John Donahoe, president and chief executive officer of Nike Inc. “We know it’s in times like these that strong brands get even stronger. As we start to see recovery in China, no one is better equipped than Nike to navigate the current climate.”

Nike was forced to close many of its retail locations in China in January because of the ongoing coronavirus. On Tuesday evening’s conference call with analysts, Donahoe said engagement with Nike trainer apps in China grew 80 percent last quarter. He added that the increased engagement translated to a digital growth of more than 30 percent in the region.

Most of the more than 5,000 stores in Greater China that were closed because of the coronavirus outbreak earlier this year have reopened, Donahoe said, and people are shopping in person.

“Nike is prepared better than anyone else to regain that brand momentum,” Donahoe said on the conference call. “People all over the globe are trying to make sport a daily habit, whenever, wherever and however they can.”

But while the stores may be open for business, it’s missed revenues from the most recent quarter are hard to ignore. In the Greater China region, sales of footwear and apparel decreased 4 percent and 10 percent, respectively. Income in China fell 13 percent during the same period.

And China isn’t the retailer’s only headwind. As the coronavirus makes its way around the globe, retailers in Europe and North America have been forced to temporarily shutter stores. Earlier this month, Nike closed all stores in North America, Western Europe, Australia and New Zealand with plans to reopen on March 27 at the earliest. But as lockdowns continue in several countries around the world in an effort to social distance, there’s no telling how long the stores will remain closed. 

There have also been a handful of sporting event cancellations because of the pandemic. Earlier this month, the NBA suspended the rest of the season. The next day, the National Collegiate Athletic Association canceled the remaining men’s and women’s basketball tournaments, followed by Major League Soccer, which postponed all events for the next eight weeks. 

Then there were the Boston and London marathons and New York Half Marathon, all pushed back to later dates or canceled. On Monday, perhaps the biggest event, the Summer Olympics in Tokyo, were postponed for at least a year. All of these cancellations result in missed revenues for Nike.

Nike’s stock, which closed up 15.18 percent, or 9.53 points, Tuesday to $72.33 on investors’ hopes of a stimulus package coming from Washington, D.C., is down 12.14 percent year-over-year. The Dow Jones Industrial Average closed up 11.37 percent, or 2,112.98 points, to 20,704.91 on Tuesday. 

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