Nike discusses Virgil Abloh, SNKRS, supply chain issues and more

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more
A Nike store in the Central Business District in Beijing. Image via Getty

Nike organized an earnings call for investors Monday afternoon, which released results for the second quarter of fiscal 2022.

The call came after Nike announced earnings an hour earlier, whose revenue rose just 1 percent year-over-year from $ 11.4 billion in the second quarter.

In a press release, Nike attributed the sales stagnation to continued challenges in the supply chain. It pointed to declines in sales in the Asia and Asia-Pacific regions of Latin America caused by "lower inventory levels due to COVID-19-related factory closures."

In the earnings call, Nike CEO and President John Donahoe and CFO Matt Friend explained Nike's challenges, accomplishments and priorities for the future. While the quarterly calls are filled with brand-name topics about how amazing Nike is in all respects in general, they are also a rare source of publicly available information from corporate executives on their performance. Here are some more interesting takeaways from the Nike Q2 2022 earnings call.


A tribute to Virgil Abloh

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more
mage via Getty

Donahoe opened his remarks with a memento of off-white designer Virgil Abloh, a top Nike employee who helped the company stay fresh during the second half of the 2010s.

"I'd like to take a moment to acknowledge the recent death of Virgil Abloh," Donahoe said before commenting on Nike's performance. Virgil has been a popular member of the Nike, Jordan and Converse families since 2016. He was a brilliant creative force who at the same time shared a passion for inspiring generations as well as challenging stagnation and promoting a new vision. But what I personally noticed about Virgil was his humility and humanity. "

Abloh, who died of rare cancer in November, has released more than 50 pairs of shoes with Nike this year alone. His work with the brand is unfinished: there are still several Off-White x Nike projects designed before his death that have yet to be published.

Donahoe did not provide an update on what will become of the unreleased sneakers but expressed her condolences to those affected by Abloh's death.

"We extend our heartfelt condolences to the families of the victims. We miss him so much, "Donaho said over the phone.

What is the dedication score?

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more

Donahoe said that during the Air Jordan 11 “Cool Gray” launch, invitations to purchase the product were sent to female users through the SNKRS app. He said group members were selected based on Nike's new Dedication Score, which aims to reward member groups with high affinity for the product. Next, Donahoe mentioned the SNKRS app's exclusive sign-in method, which encourages users to purchase desirable products by sending them an invitation via push notification.

His quote from the dedication score, which Nike has never publicly referred to before, and the exclusive access, which is so close, gives the impression that one is part of the other and that the score is a factor new to Nike. will use. to determine who can buy your most limited product in the SNKRS app. Nike has given some explanations about exclusive access before but has never been completely transparent about how it works.

Its CEO is an advocate for the implementation method and said on a recent Nike conference call that he helped bring the Off-White x Nike Dunk Low launch to its most "deserving" customers.

Nike had to cancel 130 million units

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more

The impact of the Vietnam plant closures on Nike this year was so immense that the brand had to halt production of around 130 million units. According to Friend, Nike lost three months of production volume and factories took months to return to normal production levels.

"To date," said the CFO, "all factories are up and running and employee attendance rates have improved, and weekly footwear and apparel production now accounts for about 80 percent of pre-closing volume." .

The China and Asia Pacific Latin America regions suffered a decline in units sold during the quarter due to production shutdowns and low inventory levels. Friend said SNKRS figures in China were down 50 percent year-over-year because Nike did not have the inventory in all regions to conduct a coordinated launch.

"We postponed releases to sync them around the world," he said, referring to Nike's frequent change in shoe release date during the quarter.

Nike uses robots

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more
Describing the progress in Nike's distribution network, Friend said the company has opened new regional service centers on both coasts. According to the CFO, some of Nike's distribution centers are operated by robots.

"In automation, we have added more than 1,000 robots to our distribution centers to handle digital growth," Friend said. "At our digital distribution center in Memphis, robots have processed over 10 million units that would otherwise require labor.."

Nike's CFO also wrote to Celec, the A.I. Platform that it acquired in 2019 with advances in its distribution capabilities.

Nike in the metaverse

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more

In the call, Donahoe last week talked about the acquisition of RTFKT by Nike, an NFT startup founded in January 2020 that makes virtual sneakers.

"The Nike, Jordan and Converse brands have always evolved at the intersection of sports, creativity, innovation and culture," said Donahoe. "The acquisition of RTFKT allows us to expand this reach to serve and inspire consumers and creatives in both the physical and virtual worlds."

Nike isn't the only sneaker brand that recently deepened its exposure to the Metaverse. On Friday, Adidas published an NFT project in collaboration with Bored Ape Yacht Club.

Nike removes more wholesale partners

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more

Nike's acceleration into the direct customer business came at the expense of partner retailers, which the brand has been solving for years.

"Over the past four years, North America has reduced the number of wholesale accounts by about 50 percent, "Friend said. "

Nike warned in 2017 that it plans to be more selective about the wholesale customers that stock its product. Since then, there have been regular reports of longtime family stores losing their Nike accounts.

What is Nike doing with Omicron?

Nike discusses Virgil Abloh, SNKRS, supply chain issues and more
Image via Getty

During the question-and-answer portion of the conference call at the end, an analyst asked Nike executives how the latest variant of the coronavirus is affecting business. Donahoe responded by describing Nike's expectations for when employees would return to their physical offices, which were changing recently.

"Over time, we believe that with innovation and a strong brand, we want to move to a hybrid model," said Donahoe. “As you know, in the United States we have prescribed vaccines and our response rate is very high. So we are prepared to go back to a hybrid work environment if it is safe to do so. "

Little went into how the fast-moving variant of the Omicron could deter Nike's financial goals, stating that its forecast already took into account the volatility of the sportswear business.


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