Nike Unleashes Aggressive Strategy to Skyrocket Demand Creation

Nike’s CFO Matthew Friend has cited the importance of “staying on the offensive” as it looks to capitalise on its direct-to-consumer sales growth.

The sportswear giant saw a surge in demand creation spend in the first quarter of its 2024 financial year, reaching $1.1bn (£0.9bn). This increase in spending can be attributed to advertising and marketing expenses. In addition, Friend, while speaking to investors on a call on 28 September, mentioned that the company will now shift focus away from the extensive discounting strategy pursued in recent years.

He acknowledged that consumers are still cautious about overspending and are therefore searching for promotions. He stated, "We are carefully anticipating slight improvements in markdowns for the rest of the year, considering the promotional landscape."

This comes in line with previous statements from the company in June. Back then, CEO John Donahoe expressed his belief in the importance of Nike recovering a higher level of full price growth and achieving profitable growth in fiscal year 2024.

Nike's latest results reveal a 3% increase in revenues, reaching $12.4bn (£10.12bn). Growth in the EMEA, Greater China, and Asia Pacific regions was the driving force behind this success. However, the company experienced a decline in North America, affecting both the broader brand and specifically its Converse products. This decrease, attributed to a 2% drop in North American sales, caused overall sales to fall just short of expectations, despite strong performances in other regions.

Nonetheless, the brand remains confident about its performance in the second half of 2023, thanks in large part to anticipated holiday season sales. Friend remarked, "We are closely monitoring various factors, such as foreign currency exchange rates, consumer demand during the holiday season, and our second half wholesale order book." Consequently, Nike expects a slight increase in overall revenue for the year compared to 2022.

The brand is seeing positive results from its DTC and membership strategy. Digital sales increased by 2% and overall DTC sales were up 6%, while wholesale remained unchanged. According to a friend, consumer interest in connecting with the brand directly and personally is growing, with member engagement in the direct business showing double-digit growth compared to the previous year, along with an increase in average order values.

The quarter's direct revenues totaled $5.4 billion (£4.4 billion), marking a 6% increase across all regions.

Highlighting the agility of physical retail stores in adapting their inventory, he rejected the assertions of operational inefficiency that had negatively impacted the company's stock price throughout 2023.