- For the past several years, Nike's been focused on direct and digital sales.
- On Tuesday, the sportswear company reported big jumps in both.
Nike shares jumped more than 13% Wednesday morning after the company late Tuesday reported sales and profits ahead of Wall Street expectations.
Since 2017, the company has been focused on growing direct and digital sales, a plan that accelerated in 2020 under CEO John Donahoe. Although skeptics remain, Tuesday's earnings report included sizable increases in digital and direct sales, suggesting the plan is working.
Nike is "creating more separation between us and our competition thanks to the meaningful relationships we have with consumers and the continued success of our strategy," Donahoe said at the opening of a Tuesday earnings call.
Membership, a key part of growing direct sales, is booming.
The quarter that ended on November 30 was the "biggest member demand quarter ever," Donahoe said. "We saw double-digit growth in member engagement."
Donahoe said Nike now has 160 million active members. Those members are shopping more with Nike.
For the three months ended November 30, direct sales, including in Nike stores and on Nike apps, increased 16%. Digital sales were up 25%.
Revenue increased 17% to $13.3 billion, ahead of analyst expectations.
"Nike's investments in product innovation, supply chain speed, and digital are unlocking what is likely a multi-year period of above average growth," UBS wrote in a Wednesday note to investors.
The firm has a buy rating on the stock.
Goldman Sachs reiterated its buy rating on Wednesday, listing four factors driving the stock higher, including direct-sales "fueling greater profitability over time."
As part of the consumer-first effort, Nike's working to connect its inventory more closely with wholesale partners and opening more stores. In recent years, Nike also cut ties with about 50% of its wholesale partners in order to drive more shoppers to Nike stores and apps.
Some analysts took a more cautious note on Wednesday, including Williams Trading analyst Sam Poser, who, while noting Nike's direct business is improving, said Nike is still sitting on piles of inventory. He cautioned investors to "remain on the sidelines" and not purchase any more stock.
For the quarter, inventory increased 43% to more than $9.3 billion. Three months ago, Nike reported a 44% increase in inventory.
In his pitch to Wall Street on Tuesday's call, Donahoe emphasized the company's "current headwinds," including inventory, are temporary, but the company's "tailwinds," including the consumer embrace of digital shopping, is "structural."
"We've leveraged our competitive advantages, which include a relentless innovation pipeline, unmatched brands and deep consumer connections to build relative strength and stay ahead of competition," Donahoe said.