Nike Profits Soar 196%, Best In Company History

Nike has announced its fourth-quarter (Q4) performance and annual performance for the fiscal year ending May 31, 2021. Annual profits rose 196% and 42% respectively over the previous year, and 2019 was pre-pandemic. The fiscal year’s revenues increased 19%, with the fourth quarter (Q4) increasing 96%. This includes March, April, and May. John Donahoe, President and CEO of NIKE, Inc., said, “FY21 (the full year 2021) was a Pivotal Year for NIKE, as we brought our Consumer Direct Acceleration Strategy to life across the market. We continue to invest in innovation to ensure NIKE’s continued growth.

Nike’s direct sales to its stores, digital and offline, increased 32% to over $16 billion. This represented 37% of total revenue. Nike Direct accounted for 33% of total revenue last year. Donahoe pledged to reach 50% digital business by 2025. Digital growth accounted for over 20% of total revenue and reached $9 billion in sales. Donahoe believes that 2022’s priorities are aligned with consumers. He focused on both direct-to-consumer and digital strategies (the Consumer Direct Acceleration program) and stated in the earnings call: “This is how you stay ahead of others and expand your lead.”

Gross profit margins grew from 43.4% in 2019 to 44.8% by 2021. Nike’s wholesale business grew 17%. The company continued to shift more business to direct-to-consumer models in Q4. This resulted in Q4 margins of almost 46%. The increase in wholesale shipments has helped to reduce supply chain costs and positively impacted margins. The Jordan Brand, which saw a 31% increase in performance, and Nike’s women’s business (22%), are key contributors to this success. Nike, the largest brand of women’s sports equipment globally, is worth more than $8.5 billion.

The U.S. Market gains momentum

U.S. retail sales during the same quarter (March, April, and May 2021) were up 26% minus gasoline and automobiles. The digital sales increased 13%, while clothing, accessories, and shoes rose 229% in comparison to last year’s same period when many non-essential stores closed because of the pandemic. Nike’s North American market accounted for 41% of Nike’s worldwide sales. It saw a 142% increase and 29% growth in sales compared to 2019. Nike’s North America digital growth continued to be strong, with an increase of 54% over the prior year and 177% relative to Q4 2019.

Supply chain problems plagued Nike Q3, but Q4 rebounded strongly.

The third quarter of Nike in North America was marred by supply chain problems that led to a 10% drop in revenue. Container shortages, U.S. port congestion, and logistics of inventory flow mainly related to wholesale shipments impacted the period that included December 2020, January 2021 and February 2021. Europe, Middle East, and Africa (EMEA) saw a 4% drop in sales because 45% of Nike-owned stores had been closed because of the COVID-19 pandemic. The Q3 sales growth was 3%, mainly due to digital and direct-to-consumer.

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Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

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