When Nike launched its new “Rise” store concept back in 2020, it didn’t choose Manhattan or even its hometown of Beaverton, OR. The new “experiential” concept landed first in Guangzhou, China—and it didn’t reach North America for another two years.
The reasons for that are clear in the company’s latest quarterly earnings report, where executives lauded Greater China as the key driver of revenue growth.
“It’s in Greater China that we offer the consumer Nike’s most premium and elevated retail,” CEO John Donahoe said, adding that China was home to “our best retail experiences”. All this despite broader fears about China’s economy.
Those fears aside, Nike’s Greater China revenue grew 12% in the company’s first fiscal quarter. That helped drive 2% revenue growth—even as revenues dropped 1% in North America. CFO Matt Friend blamed that slide on “restrained sell-in of marketplace supply.”
So, as Donahoe put it, Greater China is where the company’s “overall vision comes to life best.”
A lot of that vision is focused on athlete-branded lines like Phoenix Suns phenom Devin Booker’s Book 1—which Nike’s selling through an increasingly interconnected digital and physical sales strategy.
“We are seeing consumers spending more time in brick-and-mortar locations. But 90% of their shopping journeys are starting with digital,” Friend said.
Nike employees also are spending more time in brick-and-mortar locations: their offices. The company called them back some 16 months ago, a fact that Donahoe credited for the company’s latest advances in bouncy shoe foam. (By the way: Its fastest-growing section of the running business is trail running, which combines all the discomfort of regular running with a greater risk of faceplant. 🏃)
Beneath the glitz and glam, Nike’s margins are down due to higher product costs, and it’s trying to eke out more profits through business basics. That includes supply chain improvements like reducing split shipping—which is when you get multiple boxes for a single order—plus “investments in our regional service centers and a new transportation management system,” according to Friend.
And despite all the excitement about China, the company does face one major barrier there: “Our reported numbers in China are going to be challenging for the next couple of quarters,” Friend said, “because of foreign exchange headwinds.”
As it turns out, you can’t outrun a strong dollar.
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