Nike CEO touts strength in Gen Z China shopper as Covid disruptions dent regional sales

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  • Nike CEO John Donahue said the brand is “really focused” on Gen Z consumers in China and continues to be in high demand in the region.
  • The brand is struggling with overstocking but aims to normalize levels by the end of the fiscal year in May.
  • Donahue said wholesalers remain “very, very important” to Nike as they strive to strengthen their direct channels to the consumer.

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Nike CEO John Donahue said on Thursday that the company is “really focused” on Gen Z consumers in China and that the sportswear retailer continues to see strong demand in the region despite Covid-related disruptions.

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“We are still the number one cool and beloved brand in Shanghai and Beijing. We’re really focused on the Gen Z consumer in China, we’ve seen a very good response from the Gen Z consumer who wants the most innovative products and wants brands that have a global impact,” Donahue said on CNBC’s Closing Bell.

“We saw a good response in the second quarter and we have the same goals and plans for the future,” he said.

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At the end of Nike’s second fiscal quarter ending Nov. 30, China was still under a “zero Covid policy” and 1,500 Nike stores across the region were closed, resulting in a 3% drop in sales compared to last year. period.

Revenue in China — the sneaker giant’s third-largest market by revenue — was down 22% over the same period compared to the same quarter in 2021, when COVID-19 disruptions in the region were more stable.

Donahue declined to say whether spending has increased now that China has lifted its zero-Covid policy and reopened, but he said the company is confident the region remains a strong market.

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“We have taken into account some violations in our worldview, but we consider this to be transitory, we still believe in the foundations of China,” Donahue said.

“We have invested in building a hyper-local product where we take an iconic franchise like Air Force One or Dunk and localize it to be relevant to the Chinese consumer – and the Chinese consumer has really responded to that,” he said.

Nike, like other retailers, has struggled with excess inventory over the past few quarters, but Donahue said the problem is mostly in North America and the company aims to normalize levels by the end of the fiscal year in May.

“The consumer is still paying the list price for the Nike products they know and love. In areas where we have excess inventory, mostly clothing in North America, we’re working on that. Donahue said.

The sneaker giant has been trying to move away from wholesalers lately in favor of a direct-to-consumer strategy, but wholesale revenue jumped 19% in its most recent fiscal quarter, largely because the company finally has inventory available to sell to those consumers. partners.

Nike has invested heavily in its direct-to-consumer strategy, but Donahue kept it quiet on Thursday and said wholesalers remain “very, very important” to Nike.

“Consumers these days want to get what they want, when they want, how they want, and in our industry they are very clear that they want a premium and consistent shopping experience regardless of channel,” he said. .

The top manager also shrugged off concerns about the macro environment, saying: “We are ready for anything, but our goal is to make sure we get stronger during this period, no matter how inflation and the economy develop.”

Credit: www.cnbc.com /

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