By Thomas J. Ryan
At Nike’s annual meeting for shareholders held this afternoon, September 19, in Beaverton, OR, Mark Parker, Nike’s CEO, discussed Nike’s elevated women’s push, the brand’s widespread digital investments, whether China’s outsized growth can be maintained, and Nike’s continuing belief in the “power of sport.” But innovation—including scaling past successes and delivering new platforms—was called out as key to the brand’s continued growth.
“I would say, and I don’t say this lightly, but I am more excited about design and design’s impact on Nike’s future today at this moment than I’ve ever been in my almost 40 years with the company,” said Parker in the Q&A session when asked about Nike’s future in terms of design.
Parker noted that he began his career at Nike in product development and described himself as a “product geek.” While Nike’s success often gets linked to the brand’s marketing might, product innovation “is ultimately what drives the success of the company…That’s how consumers vote, and they vote every day at retail or online,” Parker asserted.
In his presentation, Parker called out a number of successful launches in the last fiscal year, including the VaporMax, React Element 87 and Air Max 270. But he promised much more are in the works. He said, “People used to ask me back when I first started at Nike, ‘What more can you do with shoes that haven’t already been done?’ And today I see so much more possibility, not just in footwear but in terms of apparel. It’s incredibly exciting.”
Parker added that many of the innovations for Nike’s fiscal year will arrive next year in time for the Tokyo Summer Olympics that runs from July 24 to August 9, 2020. He added, “This is going to be another banner year of innovation from Nike again with both incredible performance breakthroughs, as well as with style. And those two things should go together.”
In his formal presentation addressing Nike’s progress over the last fiscal year, Parker noted that new innovation platforms drove 100-percent of incremental revenue growth for Nike. The brand was able to introduce groundbreaking launches of new platforms but also scale platforms, such as the Air Max React, faster than before.
Recent well-received introductions include the Joyride, which Parker said brings a “new approach to personalized comfort cushioning,” as well as the Next%, which Parker described the” fastest platform on the planet.”
In apparel, Nike has been leveraging partnerships with leagues, including the NBA, as well as team partnerships such as Jordan Brand with Paris Saint-Germain (PSG) as well as Nike Brand with the U.S. women’s soccer team that won the 2019 World Cup.
Women’s overall grew double-digits for Nike Brand in the past fiscal year, and growth will remain a priority.
“In the year to come we will continue to innovate and unlock even greater potential,” said Parker about the women’s opportunity. “Our ambition is to innovate for all athletes, all abilities, body-types, all needs, and aspirations. And you’ll see more as we head into the Tokyo Olympics, where we see an opportunity for more athletes to push the limits of possibility and invite the world to join in something very special, and much bigger.”
On the digital front, Nike spent over $1 billion on new digital capabilities and consumer concepts over the last fiscal year. Several strategic acquisitions have sharpened Nike’s ability to anticipate consumer’s needs, including the August 2018 acquisition of Invertex that supported the launch of the Nike Fit digital-scanning solution.
Said Parker, “All told, these strategic investments are expanding our digital advantage. And they’re fueling about 35 percent growth for Nike digital in fiscal 2019, and then opening up new lanes of opportunity ahead.”
Other digital successes include the SNKRS app, doubling its business in fiscal 2019 as well as gaining more new members than any other Nike digital channel. This year, the Nike app will launch in China as well as 13 new markets in Europe.
Said Parker, “Across the marketplace we’re amplifying digital and physical experiences to lead the future of retail, bringing these together in a seamless service through the Nike app at retail to new brand experiences at our House of Innovations in New York, and Shanghai,” said Parker. “And what ties it all together is membership. It’s how we build stronger direct relationships with customers, and better serve them more personally at scale. For all of our success this year, we’re just scratching the surface of the digital opportunity for Nike.”
Parker further noted that beyond connecting with consumers, Nike is “equally dedicated to deepening the impact we create for an even wider community of stakeholders. What fuels us is a greater purpose, uniting the world through sport to create a healthy planet, active communities and equal playing fields for all.”
He pointed to the success the Dream Crazy campaign had in “elevating the voices of athletes and igniting a global conversation about the bigger meaning of sport. “
Nike continued to reduce its environmental footprint by utilizing lower-impact materials and altering production methods for its most popular products like Dri-Fit, Nike Air and Flyknit. Strategic global coalitions and partnerships were also formed as part of the “journey toward a zero-carbon, zero-waste future.”
At the grassroots level, Nike is “tackling the challenge of the least-active generation ever by harnessing the power of sport.” Nike helped more than 17 million kids worldwide get active through its Made To Play initiative while also helping nearly 100,000 community coaches to gain better access to training and coaching tools “so they can help kids build their confidence through sport and play.”
Asked whether Nike has any concerns about sustained growth in China given the headwinds from the trade war, Parker noted that Nike has achieved 20 consecutive quarters of double-digit growth in China and the country remains “one of our greatest growth opportunities.” He believes Nike benefits from having built “a brand that is of China for China” rather than as a U.S.-first brand as well as establishing a “really strong foundation” in the country over the past few decades. Other factors supporting growth in China include product innovation that is resonating with Chinese consumers as well as strong partnerships with WeChat, Tmall and others. The Chinese consumer is also among “the most digitally savvy consumers on the planet” and that’s attuned to Nike’s significant digital investments.
Andy Campion, EVP and CFO, echoed that Nike’s business “remains incredibly strong in China.” Nike is monitoring consumer sentiment and product sell-throughs at retail while also assessing demand via discussions with its many partners. Said Campion, “All remain in a very strong position. We see great affinity for the Nike brand.”
Added Campion, “We found the best risk mitigation is to stay authentic and authentically focused on the consumer in China. And maybe most importantly, to fuel greater sport participation in China that’s also a goal of the government. And, so, we’ve been partnering very closely with the government to continue to fuel and increase sport participation with the ultimate goal being just a better life for the consumers that we engage with in China.”
Asked how the company plans to unlock the women’s opportunity and build on the World Cup, Parker described the World Cup as “a huge moment for Nike and women’s sports around the world. We’re very proud to be such a central part of that, celebrating women’s sports and helping to generate more momentum going forward.”
One way Nike plans to accelerate the women’s momentum is to continue to support women’s sports participation as well as advocacy for equality and opportunities for active women. Nike sponsors over 1,000 female athletes and works with many women leagues and teams. Working with elite athletes also sparks innovation not only in performance but in lifestyle offerings. Said Parker, “I think some of the work we’re doing to push forward on the women’s side of the business is actually helping on the men’s side, and vice versa. So, it’s mutually beneficial.”
He added that Nike sees “some really good results in terms of product sales” with women, including the benefit from the soccer momentum. Basketball also remains a “big opportunity” in women’s. He added, “We continue to add and shift resources to get after accelerating what I think is an opportunity that is under-indexed…You can see this continuing to be a big priority in the company over this next year.”
Other topics covered at the meeting:
- Betsy Ross Shoe Launch Cancellation: Nike officials were asked about the company’s decision to pull a pair of special-edition sneakers that featured an early design of the American flag—one that was considered offensive by some due to its connection to an era of slavery. Parker said, “You know, we saw many people raising concerns, and we made the decision to halt the distribution. And we didn’t want to unintentionally offend or detract from the Fourth of July holiday. And that’s simply the reason that we made that decision.”
- Zion Williamson’s Impact: Asked about the impact of signing of Zion Williamson, the number one pick in the recent NBA Draft, to support Jordan Brand, Parker said the Jordan team is “working closely” with Williamson, and he’ll be wearing the Air Jordan 34 as he suits up for the New Orleans Pelicans. Parker said, “He loves the product from all the feedback we’ve been getting.” The Jordan team is also working with Williamson around product creation but have no plans set for a signature shoe in the near term. Parker added, “But I think we’re going to see an exciting future in terms of product creation, and then the impact that he’s going to have on Jordan basketball and the game of basketball in general. So great to have Zion within the Nike family.”
At the meeting, Nike’s board members were re-elected for another term, compensation packages were approved for key executives and Price Waterhouse was ratified by shareholders to continue as the company’s accounting firm.
Photo courtesy Nike