The third-quarter earnings reported by Nike Thursday afternoon were mixed -- a drop in revenue but dramatic increases in digital sales -- as the retailer struggled with challenges from the pandemic. But bad news seemingly was about to follow when just a few hours later it was reported that the company also made a round of layoffs.
The layoffs were not mentioned in the company's earnings release, but its hometown newspaper, The Oregonian and the paper's website Oregon Live reported about five hours after the financial announcements that Nike instituted an "unspecified number of recent layoffs" in an effort to build a “flatter, nimbler company
FOX Business reached out to Nike for comment regarding the reported layoffs but is still awaiting a response.
These latest cutbacks were in addition to moves the company announced last year to shave 700 employees off its payroll.
For the quarter, Nike saw its total sales rise to $10.36 billion from $10.1 billion a year earlier. While the number was lower than the $11.02 billion forecast by analysts, it is not a horrible performance given retail's turmoil spurred on by the coronavirus. The athletic outfitter said in a statement that its "revenue performance was impacted by disruption related to the Covid-19 pandemic."
Fortunately, before the pandemic changed the world at large, the Beaverton, Oregon-based company had started adding muscle to its direct-to-consumer business. As a result, the shutdown of third-party brick-and-mortar retail did not dent Nike's armor. Nike Direct -- which operates both digital outlets and a network of company-owned stores -- registered a 20% increase in sales pulling in $4 billion. Its digital operations alone saw revenue soar 59%
“NIKE's brand momentum is as strong as ever and we are driving focused growth against our largest opportunities,” Nike Chief Financial officer Matt Friend said in a statement. “We continue to see the value of a more direct, digitally-enabled strategy, fueling even greater potential for NIKE over the long term.”
Still, the company faces challenges as it tries to bounce back from a difficult 2020.
North American revenue dropped 10% with Nike suffering the same supply chain challenges -- from the U.S. port congestion to global container shortages -- as other multi-national corporations. In addition, retail sales in Europe, the Middle East, and Africa (EMEA) saw a decline with approximately 45% percent of NIKE-owned stores experiencing mandatory COVID-19 closures for the last two months of the quarter. Currently, about 65% of Nike's EMEA stores are currently open or operating on reduced hours.
Overall, Nike reported net income of $1.4 billion, or 90 cents per share, compared with $847 million, or 53 cents per share, a year ago.
Nike also announced it would resume share repurchases after halting its stock buyback program last March to "maximize liquidity during the COVID-19 pandemic." Prior to the temporary suspension of the share repurchase program, a total of 45.2 million shares had been repurchased under the program for approximately $4 billion.
In the third quarter, Nike paid shareholders $434 million in dividends, up 14% compared to the prior year.
Nike shares fell slightly in after-hours trading Thursday following the earnings announcement.