Wall Street is yet to be sold on Nike’s DTC plan, as the sportswear giant rushes to open 200 new stores in order to get its products to customers faster.
The move to open new stores and increase the company’s bricks-and-mortar footprint has been coin the ‘Consumer Direct Acceleration’.
Digital technology will play a big role in the strategy. With many of the stores utilising tech such as self-checkout through the Nike app and click-and-collect order pick ups in-store.
“We’ll be opening somewhere between 150 and 200 new stores,” Nike CEO John Donahoe said in June 2020.
“They will be small footprint, digitally enabled mono-brand stores.”
“It’s important to remember that stores are a part of direct sales,” BMO Capital Markets senior analyst Simeon Siegel told Business Insider.
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“If the whole reason to pivot is to elevate the brand and pricing power, stores need to be full-price and brand-elevating.”
Wall Street analysts are sceptical about the new direction for the sportswear company. Barclays analyst Adrienne Yih downgraded its shares this week, citing concern over an excess of inventory.
Yih also claimed that Nike is opening itself up to demand volatility by placing emphasis on a DTC model over the recurring revenue wholesale partnerships enable, in a recent note.
So far, Nike’s shares are down nearly 41% this year. However, the company remains bullish on its mission.
Company CFO Matt Friend pointed out that gross margin, which is a metric closely examined by Wall Street, grew by 2.6% to 46% over the previous two years.
“Fundamentally the Consumer Direct Acceleration strategy is changing our financial and operating model resulting in healthy profitable growth for Nike,” he said, according to Business Insider.
