Nike Earnings + Jacquemus Launch: You Win Some, You Lose Some
Plus breaking news: StockX announces staff layoffs of 8% of staff
Nike Q4 earnings
Nike reported Q4 earnings today that can only be described as mid. Revenues for the quarter were $12.2 billion, down 1% compared to the prior year. By region, revenue was up 20% in Europe, Middle East and Africa, down 5% in North America, down 19% in China and up 15% in Asia Pacific.
While some of these numbers may sound horrible, Wall Street is nothing if not an expectation game and results for the quarter were right around what analysts expected. The company beat on revenue ($12.23B versus expectations of $12.06B) and earnings ($0.90 versus expectations of $0.80).
Still, while its full-year guide was just fine, numbers came under the bar for Q123. Again, not the worst catastrophe, but three firms decided they’d seen enough and reduced price targets for Nike, causing the stock to drop 6.99% today. What was Nike priced a year ago? $159.74. What was it priced at close today? A very deflated $102.7
I often say that buyers and analysts have a lot in common. In fact it’s pretty much the same job. They’re both trying to make calls on how things will perform six months from now. One does it with sneakers and one does it with stocks. And just like buyers are starting to factor in the real-time impact of COVID and inflation on consumer demand, so are analysts making their own adjustments on stock recommendations.
A couple of items on the call that stood out for me. First, Nike announced back in 2020 it was reorganizing its business into three separate silos: men’s, women’s and kid’s. It also provide separate Jordan and Converse revenue figures. One thing that struck me is as much as Nike has talked about growing women’s, it didn’t increase very much this quarter. Men's was up 3%, women's was up just 1% and kids’ revenue was flat. Meanwhile, Jordan was up 7%.
Second, Nike has also emphasized how much shifting to direct and a more premium product line will help expand its gross margins, so I thought Ab Bernstein analyst Aneesha Sherman’s question was a particularly sharp one given Nike reported an 80 basis point gross margin decline to 45.0 percent.
Challenging Nike’s claims that a DTC strategy is the equivalent of magic retail fairy dust, she asked, “So in the past, you've talked about a sizable gross margin benefit from the shift towards the direct business. And it's been hard to see that this year with a lot of other moving parts. But if you were to strip out the supply chain and the FX and the other moving parts, are you seeing an underlying mix benefit from that move? And are you still confident that as some of these transitory costs roll off that you're still on track to get to that high 40s gross margin target in a few years?”
She then tacked on a part two: “You talked about markdowns normalizing [in other words, returning to pre-COVID levels]. So given the commentary around premiumization of the assortment, higher percent direct and digital, I would have expected you to have a lot more control over markdowns and pricing this year than, say, a couple of years ago. So is that a fair assumption that we should expect markdown breadth and depth to settle at a kind of permanently lower rate given the tighter control over the channel that you have now?”
Nike x Jacquemus debut launch
Jacquemus launched its debut capsule with Nike today on jacquemus.com with mixed results. I’m always amazed when retailers and brands think handling a limited-edition Nike launch will be no big deal and inevitably it blows up in their face as it did with Jacquemus this morning. Very large brands and retailers have entire full time teams dedicated to managing the traffic drawn by launch-day product and still struggle to get it right.
Set for a 9:00 AM EST launch time and solely announced on the brand’s Instagram feed with a single reminder on Instagram Stories, the capsule went live early at approximately 8:50 AM EST. There was no landing page for the capsule and attempts to find it by using the search bar often lead to error messages.
For the first 30-45 minutes, the site kept crashing often dumping customers who had items in their cart. In the case of the bucket hat, the site wouldn’t let customers add the hat to their cart unless they chose a size and yet, like a dystopian sneaker culture nightmare, there was no mechanism to select a size.
Still, for those who persisted, the site slowly began to get a hold of itself and by 9:45 or so, people were able to make purchases. Because I purchased two bucket hats, I know that the site fixed the error with sizing at about 10:30 EST.
By 11:00 AM EST, every items was completely sold out. It was around that time the Nike splash page showed up and I must say it was very nice with pretty pictures of Jorja Smith as shown here modeling the collection.
Designer Simon Porte Jacquemus took to Instagram following the launch where he apologized for technical difficulties. Noting 500,000 people attempted to access the launch he wrote “the website of course crashed.” And I love him as a designer, but he just needs to take the L because he was probably warned about the insane levels of traffic the launch would draw but concluded his site alone would be just fine!
While the customer experience on the site was fairly horrific, the great thing was that if you really really wanted an item from the collection and you were persistent, you were probably able to buy it. And even though the offerings weren’t next level, they were very good and provided a cute entry to the brand at a very discounted price which is exactly what collabs are supposed to do. The only thing that seemed to sell out almost immediately were Le Shorts, priced at $110. Everything else including the shoes were available to buy in multiple sizes for at least an hour.
Originally priced at $170, the shoes are now available on StockX at about $200-$300 over retail. The clothing is loaded on StockX, but as of now nobody is offering any items for purchase. (And isn’t it crazy, even though I easily could have bought the shoe, in the end I decided not to and yet, now that' it’s sold out I kind of want a pair! Scarcity is a hell of a drug!)
Finally, if you missed out, this collection will be sold on SNKRS in September. It will also be sold at some tier zero Nike accounts this summer (or maybe in September too?) though no store has announced timing.
One last quick, sad breaking story: StockX is laying off about 8% of its workforce, citing macroeconomic challenges. In a statement provided to Footwear News, the company stated, “While our business continues to grow, the current climate calls for us to make adjustments. As a result, we made the difficult but prudent decision to reduce our workforce.”
Two more Jorja Smith photos ahead…