Nike just blew past Wall Street's expectations, and experts say it's thanks to tech and taking risks like its Colin Kaepernick campaign
- Nike shares hit a record high on Wednesday after the brand greatly exceeded sales forecasts, pointing to payoff from long-term investments in areas like inclusive sizing, technology, and resonant advertising campaigns.
- "Nike has become not just a commodity, but a statement," Jeff Carvalho, managing director of Highsnobiety, told Business Insider. "When you try to reach a new young consumer on their playing field and on their terms, it's no longer simply putting out a great product."
- We spoke to experts about what factors are driving Nike's success. Here's what we learned.
- Visit Business Insider's homepage for more stories.
Nike's long-term investments and risk-taking strategy is starting to pay off.
Nike shares reached a record high after the company greatly exceeded market expectations, reporting in its earnings call on Tuesday that sales grew by 4% in North American and 27% in Greater China for its first fiscal quarter of 2020. The spike comes on the heels of two quarters of sluggish growth, an uptick that CEO Mark Parker attributed to dogged efforts in areas like global e-commerce, expanded sizing, and strategic marketing campaigns.
"Nike is figuring out how to extend its brand image in authentic ways which is enabling it to gain new customers," UBS analysts wrote in a note after the call. "Nike is further defining itself not just as a sports brand, but also a health & wellness brand. We think it's working."
We spoke with experts about what's setting Nike ahead of the pack. Here are the tactics they say are driving Nike's success.
Taking a stand
According to Jeff Carvalho, managing director of Highsnobiety, Nike is continuing to reap the benefits of taking a pointed stand on social issues, including its 2018 campaign featuring NFL star Colin Kaepernick. Debate swirled around the campaign, which nodded to the player's outspoken protests of Trump policies and pervasive racism in America.
The campaign won an "Outstanding Commercial" award at the Creative Arts Emmy Awards this month, but beyond the accolades, Carvalho said Nike's dedication to speaking out on social issues is helping build cachet with "young, sophisticated, tastemakers."
"Nike has become not just a commodity, but a statement," he said. "When you try to reach a new young consumer on their playing field and on their terms, it's no longer simply putting out a great product. You now have to be a company that can stand behind something because the consumer today is demanding that."
Corey Pierson - CEO and founder of Custora, a customer analytics platform for the retail industry - echoed Carvalho and added that efforts like the Kaepernick campaign expand upon components of Nike's heritage and brand identity, including being a company based on inspiration and community-building through sports.
"A lot of brands are realizing that brand building and that sort of emotional connection is now not a nice-to-have but a need-to-have," he said. "Nike's a perfect example of a brand that is truly walking the walk when it comes to this notion of being customer-centric. It's known for being very focused and obsessed with their customer data and the feedback loop that customers are giving them."
Embracing inclusive design
Women's apparel and footwear experienced double-digit growth in the most recent quarter, thanks to smart marketing around global athletic events like the Women's World Cup, but also as a result of embracing expanded sizing and diversifying styles.
"From competition to fitness to light activity to play, our more inclusive view on design is opening up new lanes of opportunity for growth. For example, we're studying the fit of our products to serve more body types with our successful plus-size line," Nike CEO Parker told investors on the earnings call.
In June, Nike debuted a plus-sized female mannequin in its London flagship store, drawing both praise and ire, the latter thanks to an op-ed in The Telegraph decrying the company for promoting fat acceptance. Regardless of stoking controversy, the move helped build awareness of Nike's plus-size offerings - in the immediate aftermath, searches for "plus size" grew by 387% on the website of the British retail site Love the Sales.
"From a product perspective, really embracing and focusing on the female consumer is a huge win for them," said Joe Yakuel, CEO of Agency Within, an agency partner of Nike that works on social media campaigns and display marketing in North America. "Doing that both from a functional product perspective as well as from a fashion perspective is really enabling them to capture a bigger part of that market share."
Nike has also been mindful toward other demographics like kids, launching new programs like a subscription box for sneakers, an appealing option for busy parents trying to outfit quickly growing children. The brand reported it experienced its biggest back-to-school season to date.
Nike finds its digital footing
Enhanced technology has also been a significant focus for Nike, and ultimately a major driver of sales growth. This has included digital efforts on virtually every aspect of the company, from advanced supply chain technology and improved RFID tracking, to app updates and in-store tech partnerships with retailers like Foot Locker.
"They're making smart bets on keeping up with their customers and aligning the business to understand where customers are heating up and the supply side scene, and making sure that fulfillment and merchandising needs are meeting those consumer demands," Pierson said. "They did a few smart acquisitions and they've been able to leverage the benefits of those technologies more quickly than an in-house project would have."
Parker said on the call with investors that moving into the rest of the year, the company will continue to build upon digital efforts in three key areas: customer experience both in-store and online, back-end capabilities, and scale on the supply and partner side.
"While products are usually the first to grab the attention of our consumers, we deepened those relationships through the power of digital," he said.