Nike CEO touts strength in Gen Z China shopper as Covid disruptions dent regional sales
- Nike CEO John Donahoe said the brand is "really focused" on Gen Z consumers in China and continues to see strong demand in the region.
- The brand has been grappling with a glut of inventory but aims to see levels normalized by the end of the fiscal year in May.
- Amid a push to strengthen its direct-to-consumer channels, Donahoe said wholesalers remain "very, very important" to Nike.
Nike CEO John Donahoe said Thursday the company is "really focused" on Gen Z consumers in China and that the athletic apparel retailer is continuing to see strong demand in the region, even amid Covid-related disruptions.
"We're still the number one cool and favorite brand in Shanghai and in Beijing. We're really focused on the Gen Z consumer in China, we saw a very good response from the Gen Z consumer who wants the most innovative products and wants brands that are globally relevant," Donahoe told CNBC's "Closing Bell."
"We saw good response in Q2, and we have the same focus and outlook going forward," he said.
At the end of Nike's fiscal second-quarter, ended Nov. 30, China's "zero Covid policy" was still in effect and 1,500 Nike stores across the region were shut down, leading to a 3% drop in sales compared with the year-ago period.
Revenue in China – the sneaker giant's third-biggest market by revenue – was down 22% during the period from the same quarter in 2021, when Covid disruptions were more stable in the region.
Donahoe didn't address whether spending has ramped back up now that China has rescinded its zero Covid policy and reopened, but he said the company is confident the region remains a strong market.
"We factored in some disruption in our outlook, but we view that as transitory, we still believe in the fundamentals of China," said Donahoe.
"We invested in building hyperlocal product where we take an iconic franchise like Air Force One, or Dunk and we localize it so it's relevant for the Chinese consumer — and the Chinese consumer really responded to that," he said.
For the last several quarters, Nike, like other retailers, has been grappling with a glut of inventory but Donahoe said the problem is primarily in North America and the company aims to see levels normalized by the end of the fiscal year in May.
"The consumer is still paying list price for the Nike products that they know and love. In the areas where we have excess inventory, which is primarily apparel in North America, we are working through it. We're discounting and working through it," said Donahoe.
Recently, the sneaker giant has tried to move away from wholesalers in favor of a direct-to-consumer strategy, but during its most recent fiscal quarter, wholesale revenue jumped 19% – largely because the company finally had the inventory available to sell to those partners.
Nike has invested heavily in its direct-to-consumer strategy, but Donahoe glossed over that focus on Thursday and said wholesalers remain "very, very important" to Nike.
"Consumers in this day and age want to get what they want, when they want it, how they want it, and in our industry, they've been very clear they want a premium and consistent shopping experience regardless of channel," he said.
The top executive also brushed off concerns over the macroenvironment, saying, "We're prepared for anything but our focus is to make sure that we get stronger through this period, regardless of how the inflation and economy play out."