Nike Beats Wall Street’s Q2 2023 Expectations, Stock Surges

Here’s what is working for the activewear company

Nike reported its fiscal 2023 second-quarter (Q2) results, exceeding Wall Street’s expectations. The second-quarter revenues were $13.3 billion, up 17% compared to the prior year, with direct sales of $5.4 billion, up 16%.

In response, shares of Nike rose 6.5% late Tuesday.

According to the popular athletic brand, brand momentum has accelerated into the holiday season, with Black Friday and Cyber Week performance setting new highs for demand and traffic.

For the past two and a half years, the brand’s catchphrase – “In times of turbulence, strong brands can get stronger” — has proven true.

Even in uncertain economic times, here’s what’s working for the athletic brand:

Consumer demand as Nike is prioritized across the globe

Nike says its consumer demand stands out due to its meaningful relationships with its consumers and its strategy.  

“Our Q2 growth was broad based across our brands, channels, and geographies. We had strong double-digit growth across both our partners and our direct business, which was once again led by our industry-leading digital performance,” reported John Donahoe, President and CEO of Nike. 

Consumer demand increased across Nike, Jordan, and Converse, with Nike’s holiday season momentum having continued globally during December. The athleticwear company says it intends to continue cultivating direct and lifelong relationships with its customers.

Progress on Inventory

Nike executives stated on the Q2 2023 earnings call that they believe the brand’s inventory peak is behind it because its plans are working. Nike says it is making progress on its inventory in North America, and its second-quarter results give the company confidence that it is on track to meet long-term targets.

“Last quarter, we talked specifically about the actions we are taking to address excess inventory with focus on pockets of seasonally late products, predominantly in apparel,” Matt Friend, Nike CFO, said. “At the end of Q2, we are tracking in line with our plan, and we are pleased with the progress we have made over the last 90 days.”

Improving on popular platforms & focusing on Basketball

Nike’s CEO shared that the athletic brand starts with product innovation. “We win with product because we know it’s not only about individual innovations, but also about our ability to continuously bring newness to our greatest franchises,” he said on the call.

Nike launched LeBron 20, LeBron’s first signature shoe to debut as a low-top, which was created using consumer insight and performance demands by the pro basketball player.

The athletic brand also says it’s continuing to expand its portfolio, with signature debuts in Nike Basketball and Jordan brand. Most recently, the Nike Mercurial performed well at the World Cup, a feat that Nike leadership is celebrating.

“The new Mercurial scored more goals than any other boot, led by Kylian Mbappé who won the Golden Boot as the tournament’s top scorer. In fact, Nike boots dominated the World Cup, scoring more goals than all other brands combined. And consumers have responded to this energy, giving the new material the highest full-price realization of any performance product, this quarter globally,” Donahue shared.

Consumer insights

Nike attributes its success to paying attention to its loyal fan base and its desires.

“Consumers want to get what they want, when they want it, and how they want it. And consumers have told us they want a consistent, seamless, and premium experience, both digitally and physically around model brand and multi-brand,” the Nike CEO stated on the Q2 2023 earnings call.

According to the brand, it is expanding its reach through strategic wholesale partnerships and filling the gap for women’s fitness, and membership was a key reason Nike’s digital business grew 34% this quarter.

Engagement

The athletic brand says it has approximately 160 million active members who engage on a regular basis, with repeat-buyers who spend more (and more frequently).

Engagement is an area that Nike will continue to focus on, either through NIKE Training Club, NIKE Run Club, the SNKRS app, where the brand says it’s more than just what is purchased, but the level of engagement. 

“We think there’s a lot of content that we can be bringing to those members,” Donahue said, also teasing that there will be some interesting announcements in the coming weeks regarding partnership and other engagement endeavors. 

Nike also takes pride in its digital growth, pointing to its clean experience across its apps and on nike.com.

China

Nike’s leadership reports that it’s pleased with China’s results this quarter and has been concentrating on the Chinese consumer and their affinity for the Nike, Jordan, and Converse brands.

“We’ve been very focused on youth in China, the young consumer, both kids and Gen Z,” Donahue said.

Nike says it has launched China-specific versions of its apps to create fast, engaging, and personalized experiences in order to stir up more demand.

“We created a first-of-its kind China-specific member journey with Tmall, which saw a significant uplift in new member recruitment and demand per member,” Donahue reported, speaking of Tmall’s B2C online retail model. 

Aside from the recent earnings report, Nike announced a new retail concept under Jordan brand that launched on December 16 in Milan. The retail experience, dubbed “World of Flight,” is aimed at an affluent audience.