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How Nike's Big Digital Push Is Shaping Its Future

By Brian Withers and Neil Patel – Oct 23, 2021 at 6:00AM

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The company is using digital initiatives to build a deeper connection with its most loyal customers.

Nike (NKE -0.23%) has a goal of 40% digital penetration by fiscal 2025, and management says the company is on track to meet it. In this video clip from "Beat & Raise," recorded on Sept. 24, contributors Brian Withers and Neil Patel take a look at how Nike is leveraging digital to increase its sales. 

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Brian Withers: The other piece about Nike that I always watch, I was an Under Armour shareholder for a long time, is Nike's business is all about footwear. Of the Nike Brand revenues of 11.6 billion in the quarter, 7.7 billion of that was from footwear. The footwear segment went up 14 percent but if you look at currency neutral, it only went up 10 percent. There's a bit of currency stuff going globally with the footwear segment. That's part of what drag down. [laughs] if you look at currency neutral growth of 12 percent as down, I guess it was lower than what folks expected, but it could be that people aren't out going to the stores as much to buy footwear, and if you're not going to school or going to work, the stuff on your feet may last longer.

Neil Patel: Just to add to that. I was actually at a Nike store recently and it was pretty busy. [laughs] But I think, like you said, Lululemon (LULU 2.02%) has built their business on vertical integration, so they want to control production all the way to the customer relationship, and that's definitely benefiting them right now. You see Nike making a big push into digital and technology, their suite of digital [inaudible 03:40:16] for Nike is beautiful, and I think that's going to be their next leg of growth is, can we build a deeper connection with our most loyal customers and push that digital revenue going forward? I guess one of the highlights, apart from digital sales growing 28 percent in the quarter, management mentioned that they still are on pace to reach their 40 percent digital penetration by fiscal 25. They're on track to do that, and so a lot of that is their being consumer-direct acceleration initiative that they've been doing for a few years now. The next three, four months with the holiday season coming up will be really interesting to see how these companies prepare themselves for that.

Withers: You mentioned that digital push, I had forgotten to bring up that John Donahoe is president and CEO of Nike since January 2020, and he came from ServiceNow. He's very much a tech forward guy and made no bones about that's where he was taking the business when he came on. It's really neat to see digital sales respond. I think, Nike, that's an important leg of their brand that they need to get right, and it's good to see them make progress there.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica and Nike. The Motley Fool has a disclosure policy.

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