Nike

Nike raised prices in 2021 and continued to benefit from those hikes. In September 2021, Nike told investors it was taking advantage of the strong market by raising prices

Nike CFO: “We delivered strong growth in average selling price this quarter with continued improvement in full price realization. “Matthew Friend — Executive Vice President and Chief Financial Officer: And coming back to marketplace health for a moment, we delivered strong growth in average selling price this quarter with continued improvement in full price realization. This performance reflects our intentional efforts to manage the health of our product franchises as demand surges to move available inventory to serve demand in the right channels and to drive a more premium experience for consumers. This quarter, we exceeded our 65% full price sales realization goal, which reflects the expectations that we put forward at our last Investor Day.” (Nike Q1 2022 Earnings Call, 9/23/2021)

Nike CFO: “We still expect gross margin to expand 125 basis points versus the prior year…reflecting stronger than expected full price realization, the ongoing shift to our more profitable NIKE Direct business and price increases in the second half.” “Matthew Friend — Executive Vice President and Chief Financial Officer: Turning to the rest of the P&L. We still expect gross margin to expand 125 basis points versus the prior year, at the low end of our prior guidance, reflecting stronger than expected full price realization, the ongoing shift to our more profitable NIKE Direct business and price increases in the second half. This more than offsets roughly 100 basis points of additional transportation, logistics and airfreight costs to move inventory in this dynamic environment. We also expect a lower foreign exchange benefit now estimated to be a tailwind of roughly 60 basis points. And for the second quarter, we expect gross margin to expand at a rate lower than the full year due to higher planned airfreight investment for the holiday season.” (Nike Q1 2022 Earnings Call, 9/23/2021)

Nike CFO: “when you’ve got a strong brand and you’ve got a healthy pull market, what we’re seeing is strong full price margins offsetting some of these transient costs that we’re going to experience as we move product around the world.”“Matthew Friend — Executive Vice President and Chief Financial Officer : As we look longer term, we’re absolutely continuing to look toward that high 40% gross margin outlook that we provided last quarter. And in the short term, we’re going to navigate through these transitory impacts. But when you’re — when you’ve got a strong brand and you’ve got a healthy pull market, what we’re seeing is strong full price margins offsetting some of these transient costs that we’re going to experience as we move product around the world.” (Nike Q1 2022 Earnings Call, 9/23/2021)

Nike CFO: “we’ve taken some pricing pricing actions in the second half… the price increases that we’ve implemented in the second half are in the low single digit range.” “Matthew Friend — Executive Vice President and Chief Financial Officer : Yes, so on the pricing question. We — I mentioned in my prepared remarks that we’ve taken some pricing pricing actions in the second half. And what I would say, Simeon, is that we evaluate price value of our products on a season by season basis and we consider a number of different factors that we incorporate to make a decision about what to do, but what I will tell you is that we take a long — we have a long-standing relationship with our consumer and so we take a long-term view to these types of decisions. And so the price increases that we’ve implemented in the second half are in the low single digit range. And we feel it’s appropriate given the marketplace we’re operating in and there’s other factors that I referenced, considering we’ve got rising input costs and other factors that are impacting our business.” (Nike Q1 2022 Earnings Call, 9/23/2021)

By December 2021, Nike said the benefit of higher prices and lower markdowns was the biggest driver of its margin expansion

Nike CFO: “the biggest drivers of gross margin expansion this quarter, and frankly, the biggest driver relative to what we had guided 90 days ago was the level of full price realization and lower markdown rates versus what we had anticipated for a holiday season.” “Matthew Friend — Executive Vice President and Chief Financial Officer: Sure, Laurent. As I mentioned in my prepared remarks, the biggest drivers of gross margin expansion this quarter, and frankly, the biggest driver relative to what we had guided 90 days ago was the level of full price realization and lower markdown rates versus what we had anticipated for a holiday season. And so, we were surprised by it. And its just reflective of the strength of the brand and the connections that we’ve got with consumers. As we look to the balance of the year, we are expecting full-price realization to stay high and above, especially in North America and EMEA, that goal that we provided at Investor Day a couple of years ago, and we expect discount rates to remain low. The impact, as you look at sequential quarters is that we started to see improvements in markdown rates in the second half of last year in those two geographies in particular. And so, the year-over-year impact from tighter supply, higher full price realization, lower markdowns has a lesser of an impact in the second quarter.” (Nike Q2 2022 Earnings Call, 12/21/2021)

Nike CFO: “Nike’s second quarter financial results were in line with the expectations we established 90 days ago, fueled by continued Brand momentum, the strength of our product franchises with extraordinary levels of full price realization…” “Matthew Friend — Executive Vice President and Chief Financial Officer: Nike’s second quarter financial results were in line with the expectations we established 90 days ago, fueled by continued Brand momentum, the strength of our product franchises with extraordinary levels of full price realization, and strong season-to-date Holiday sales, offset by lower levels of available inventory supply relative to marketplace demand.” (Nike Q2 2022 Earnings Call, 12/21/2021)

Nike CFO: “This quarter, our full price Digital business grew over 20%, resulting in a 30 point improvement in full prices sales mix, double-digit growth in AUR and improvement in markdown rates and promotions.”“Matthew Friend — Executive Vice President and Chief Financial Officer : This quarter, our full price Digital business grew over 20%, resulting in a 30 point improvement in full prices sales mix, double-digit growth in AUR and improvement in markdown rates and promotions. This contributed to strong year-over-year expansion in gross margin and return on sales profitability. (Nike Q2 2022 Earnings Call, 12/21/2021)

Nike’s CFO said that gross margins were up as “strong consumer demand continues to fuel high levels of full price realization,” noting the “benefits of strategic pricing.” “Matt Friend — Chief Financial Officer: Specifically for the fourth quarter, in North America, we expect a decline in revenue due to year-over-year comparisons. And in Greater China, we expect to see another quarter of sequential improvement while we closely monitor the operational impact related to recent COVID lockdowns. We now expect gross margin to expand by at least 150 basis points versus the prior year as strong consumer demand continues to fuel high levels of full price realization, low markdown rates and low customer returns. Benefits of strategic pricing expected in Q4 are being partially offset by elevated product costs, primarily due to higher macro input costs, supply chain costs and strategic actions to expedite delivery of product in North America.” (Nike Q3 2022 Earnings Call, 3/21/2022)

Nike’s CFO said higher margins were a result of lower markdowns and “higher full price mix.” “Matt Friend — Chief Financial Officer: Wholesale returned to growth, up 1% on a currency-neutral basis. NIKE Digital grew 22%, fueled by strong demand through our NIKE app. NIKE-owned stores grew 14% with significant improvements in traffic during the quarter. Gross margin increased 100 basis points versus the prior year, driven primarily by higher NIKE Direct margins due to lower markdowns, favorable foreign currency exchange rates and a higher full price mix, partially offset by increased freight and logistics costs.” (Nike Q3 2022 Earnings Call, 3/21/2022)

Nike’s CFO: “North America continues to experience strong full price realization and low markdown rates across the marketplace.” “Matt Friend — Chief Financial Officer: North America continues to experience strong full price realization and low markdown rates across the marketplace as inventory supply begins to improve. NIKE-owned inventory levels increased 22% versus the prior year, with in-transit inventory now representing 65% of total inventory at the end of the quarter, as transit times are now more than six weeks longer than pre-pandemic levels and two weeks longer than the same period in the prior year. In order to ensure the right assortment of products arrive on time for the fall selling season, we have moved forward our buying time lines to accommodate for longer transit times.” (Nike Q3 2022 Earnings Call, 3/21/2022)

Nike’s CFO: “Retail sales across the marketplace grew strong double digits with improvements in full price realization and lower average markdown rates.” Matt Friend — Chief Financial Officer: Retail sales across the marketplace grew strong double digits with improvements in full price realization and lower average markdown rates. Team sports continues to make its comeback and the continuation of the Champions League tournament enabled global football to drive energy across the region. The momentum behind the Jordan brand in EMEA is also driving strong growth across all consumer segments, led by women. NIKE Direct grew 22% on a currency-neutral basis, led by growth in NIKE-owned stores of 44% as we compare to uneven store closures due to COVID-related government restrictions in the prior year.” (Nike Q3 2022 Earnings Call, 3/21/2022)

Nike’s CFO said price increases were not impacting strong demand and that “we’re continuing to look at the opportunities for additional pricing, and we do see some.” “Matt Friend — Chief Financial Officer: Yeah. And just hitting the second part of your question, we continue to see strong consumer demand for our portfolio of brands. And that’s been true for the past several quarters, and we know we haven’t been able to meet marketplace demand with available inventory supply. We did implement a low single-digit price increase in the second half of this year or for the spring/summer ’23 season to be more specific. And given the transit times delays, we’ll start to see more of that hit the market in the fourth quarter. But our approach to pricing and to the consumer is a careful one. We evaluate the price value of our products on a season-by-season basis. And our financial model as a premium brand starts first with the value that we create for the consumer in our products. And so we’re very careful about how we approach pricing, and we take a long-term view with regards to the consumer because of that relationship that we have. So as we look forward to the fourth quarter and fiscal ’23, we’re continuing to look at the opportunities for additional pricing, and we do see some. But as it relates to consumer demand for our brands, we continue to see strong consumer demand for our brands and for our products because they find value in our products.” (Nike Q3 2022 Earnings Call, 3/21/2022)