At Nike’s 37th annual meeting held at its Beaverton headquarters, Nike officials discussed the company’s liberal leanings, its climate change actions and new NBA partnership. But most of the time was spent talking up its “Consumer Direct Offense” initiative.
In prepared remarks, Mark Parker, chairman, president and CEO, discussed many aspects of the Consumer Direct Offense, first announced in June, designed to accelerate product innovation, move closer to the consumer through a Key Cities initiative and to deepen the company’s one-to-one connections with customers.
The program amplified its “Triple Double” strategy – 2X Innovation; 2X Speed; and 2X Direct – revealed in March on its third-quarter conference call. That strategy aims to double down on innovation, speed to market, and direct connections with customers through digital, membership and personalization.
Receiving much attention as part of the Consumer Direct Offense initiative has been Nike’s plans to eliminate 2 percent of its nearly 71,000-strong workforce.
In the shareholder question session at its annual meeting, Nike’s management team was asked why the Consumer Direct Offense program was launched now and why job losses were involved.
Parker, in his first board meeting since replacing co-founder Phil Knight as chairman, said the consumer “is moving faster than ever before. Their expectations are rising by the day. That means we have to move with the consumer. In fact, try to move ahead of the consumer. And that’s exactly what the restructuring against the Consumer Direct Offense is all about.”
He added, “I’m really excited about getting the organization more obsessed with the consumer – closer to the consumer – so we can service as well as ignite this next phase of growth.”
At the same time, Parker called the last year a “challenging time” for Nike because the changes in focus forced the company to “make decisions to let some of our teammates go.”
“That’s an incredibly challenging part of what we do,” Parker elaborated. “When we looked at the priorities and the need shift to focus the business on the things that were really going to drive us forward and grow, we had to make those decisions. And we don’t take those lightly, believe me. This is incredibly challenging.”
He added, “But I’m excited and energized at the same time. Because I think it puts us in a position as a business, company and organization to drive growth, to get closer the consumer, and really push the potential of the company through this next phase. We’re largely through this restructuring so we’re focused on moving forward and creating some great, great work over this next fiscal year.”
Asked about the financial implications of the Consumer Direct Offense, CFO Andy Campion said the initiative “has to do with what we’re all about, which is better serving consumers – continually increasing over time.”
From a financial perspective, the benefits are two-fold, he added. Said Campion, “One, we believe that it will reignite Nike’s growth and drive the next horizon of long-term growth over the future of Nike. Secondly, it’s driving an increasingly focused and accelerated investment agenda.”
Addressing growth, he said 2X Innovation is “about giving consumers more” desired product and that’s often traced back to real innovation. He noted, for example, that after Eliud Kipchoge earlier this year ran the Nike’s Breaking2 in a time of 2:00:25 in the Nike Zoom Vaporfly Elite, “we know we want that shoe regardless of whether we can ever accomplish that ourselves. We want new, fresh innovative product. So 2X Innovation is about bringing more of that at an increased cadence to consumers and that ultimately results in growth.”
2X Speed in about “capturing that strong demand” as quick as possible. Said Campion, “The closer we can get to that moment in the heat of the moment, the more opportunity we know there is from a growth perspective with consumers.”
Finally, 2X Direct is about leveraging digital to “create incredibly compelling experiences” at retail and online. Said Campion, “We continue to see growth when we connect more directly with consumers at retail outpace undifferentiated multi-brand wholesale.”
He added that the Consumer Direct Offense is already supporting “incredibly strong momentum” internationally and is believed to be “the key to reigniting strong growth in the U.S. marketplace.”
As one example of the costs involved, Campion noted that the 2X Direct push will involve accelerated investments ranging from data analytics to machine learning to enhance its personalization techniques and build “world-class” digital capabilities.
Concluded Campion, “When you have such a concise three-prong strategy, it actually enables everyone in the far reaches of the company to really focus their investment resources and management attention on what we think will fuel that next horizon of growth. So in short, again, why we’re most excited about it is our goal has always been to better serve consumers. And we know that when we create value for consumers that translates into incredibly strong financial results and long-term profitable and sustainable growth.”
Another shareholder question addressed Nike’s new NBA deal. This coming season, Nike takes over for Adidas, which had been league’s official apparel outfitter since the 2006 season, as part of an eight-year deal. The new uniforms were unveiled the prior week.
Broadly regarding its NBA partnership, Trevor Edwards, president, Nike Brand, said that “one of the amazing things is that basketball is the next truly global sport and we’re super excited to be working with the NBA in partnership to really grow the sport around the world.” He added that the growth will come not only from a performance and lifestyle perspective but “also from a culture-connection perspective.”
He said two aspects stood out to him about the uniform introduction. One was developing the “most incredible uniforms” that are 20 percent lighter than the previous uniforms players used. Added Edwards, “Our athletes were really demanding that so obviously having the Swoosh on that is something that’s really exciting for us.”
The second was the launch of NikeConnect technology. Beginning on Sept. 29, fans can purchase an adult-sized Nike NBA Connected Jersey, which will be embedded with an NFC (near field communication) chip that can unlock exclusive team and player content, exclusive deals and personalized services through a smartphone.
“What we’ve been able to do is connect the technology to the jersey and that allows our consumers to get the opportunity to have a direct connection with the athletes that they love,” said Edwards
Edwards added, “This really brings a new way of connecting with our consumers that really speaks to how we bring our brand closer to consumers and that is really a step to the future.”
Among some other shareholder questions, Nike’s officials were asked whether they think about the company’s conservative or libertarian employees when it “consistently takes liberal public policy positions” and whether the opinions of those employees matter.
Parker basically answered that those stances match the positioning and values of Nike. He stated, “First of all, we value the opinions of all our employees. Our values are very clear when it comes to diversity and inclusion. Clear and consistent. And we feel it’s important for us to have that voice. The policies that we stand for are aligned with our values as a company with regards to diversity and inclusion and sustainability. And I’m proud of the positions that we’ve taken in that respect.”
Around sustainability, one question noted that Nike recently restated its support for the Paris Climate Agreement and asked what the company was doing around climate change.
Hannah Jones, Nike’s chief sustainability officer and VP, Innovation Accelerator, said Nike has “long followed and tracked the science around climate change and the potential scenarios it could play out and the way climate change could impact our consumer because the athlete has to have clean air to be able to practice sports.”
Such analysis, she added, also involves its impact on the material that goes into Nike’s products and supply chain.
“We lead with innovation and we believe the job of any business leader is to anticipate the future to allow the company to be resilient and to grow within whatever that future scenario is,” stated Jones. “And so we’ve been innovating relentlessly to bring to market products that marry sustainability with performance.”
As an example, she noted that Nike this week launched Fly Leather, an engineered leather that is 50 percent lighter and five times stronger than traditional leather (based on abrasion testing) while reducing its carbon footprint by 80 percent. Said Jones, “That’s the kind of ‘win win’ we like bringing to the market.”
Jones also noted that Nike has invested “heavily” in renewable energy based on a publicly-stated goal to reach 100-percent renewable energy in company-owned-and-operated facilities by 2025. Jones told shareholders such moves often lead to cost savings. Said Jones, “We will continue to advocate at a global level for policies that enable businesses to thrive into that future and we look forward to being part of the low carbon-growth economy.”
Parker added on the subject, “We feel very strong that our commitment to sustainability is also the right thing for our business and those two things don’t have to be at odds at all. In fact, that’s where we’re focused with our innovation – to bring those two things together.”
Nike’s management team was also asked about its deal with Georgetown and the Workers Right Consortium (WRC). The deal, reached in late August, provided WRC with formal access to Nike supplier factories that manufacture WRC-affiliated collegiate products, to investigate working conditions and strengthen coordination regarding any remediation efforts.
Said Jones, “We’ve been working hard over the summer with Georgetown and with the WRC, Workers Rights Consortium, and we’re pleased to say we’ve come to an agreement together formalizing a protocol for how the WRC plays a role within this overall ecosystem of changing supply chain and improving worker rights. Georgetown has been a fantastic partner to us. We’ve worked with them for 35 years and we’re delighted to continue in that partnership with them and to work with the WRC.”
Student activists had held protests on Georgetown’s campus over the issue and called for the university to end its contract. John Thompson, Georgetown’s legendary coach, sits on Nike’s board and was in attendance at the meeting.
Photo courtesy Nike
