Nike - New digital empowered phase of consumer direct strategy announced with Q4 results Of relevance to JD Sports, Nike (NR) announced a new digitally empowered phase of its consumer direct strategy last night with its Q4 (end May) update. It increased its 2023 digital penetration target, both owned and partnered, originally set at 30% in 2018, to 50%. Whilst the bears of JD might point to increased risk of disintermediation, in our view more importantly, from JD Sports’ perspective, Nike management reiterated that its strategic wholesale partners are a very important part of the new strategic focus. Consistent with its recent strategy, Nike continues to envisage having fewer wholesale partners. Management talked about its OneNike marketplace strategy, which leads with Nike Digital in its own stores and embraces a small number of strategic partners with the same vision ‘to provide a consistent premium shopping experience’ and ‘providing a seamless experience, a consistent seamless experience with physical points of presence.’ Nike plans to use connected data, inventory and membership to give consumers greater access to the best of Nike, with more speed and convenience than ever. Membership is now central to Nike’s growth strategy. It will also scale its investment and smaller format digitally-enabled mono-brand stores with integrated online-to-offline capabilities. The mono-brand stores will be used to accelerate Nike's growth in Women's and Apparel which are seen by management as two of its best long-term profit opportunities. It envisaged opening 150-200 new mono-brand stores in North America and EMEA. Nike’s June US retail sales up double-digit, EMEA slightly up. Positive read across to JD showing athleisure in demand Nike’s Q4 revenue fell 38% on a reported basis (down 36% at constant FX), reflecting store closures and lower wholesale shipment. In Q4, 90% of Nike’s own stores outside of Greater China & South Korea were closed for c.8 weeks. Its wholesale partners’ stores similarly impacted. Stores started to reopen in mid-May with c.85% of Nike owned stores now open in North America, c.90 percent in EMEA, c.65% in APLA or operating under reduced hours. North America Q4 revenues fell 46%. As retail began to reopen in mid-May, Nike retail sales were up double-digit for all brands across the total North America marketplace and this trend has continued into June with Nike digital up triple digit. Physical retail traffic is down, but conversion up due to promotional activity as well as a shift to owned and partner digital. EMEA Q4 revenues were down 44% on a currency-neutral basis with Digital up nearly 100%. As retail has reopened, Nike has seen total retail sales grow slightly year-on-year, with better performance in Germany, France and UK offset by slower Spain & Italy. European traffic levels, conversion trends and consumer shifts towards digital are similar to those seen in North America. continued overleaf