Analysts Say Nike'S Troubles In The Chinese Market

Pay attention to this week.

Analysts and investors released in the first quarter report, as China's economic slowdown has led to a decline in consumer demand, the Chinese market is causing serious concern.

CamiloLyon, an analyst at investment bank CanaccordGenuity, said that Nike's business in China is more cautious because of the problem of overstock and excessive discount sales in the whole market.

Lyon has just concluded a week long tour in China.

He said there is no doubt that Nike is in a strong leading position in China. However, this advantage is also affected by various macro pressures and fierce competition promotion environment.

Nike's total sales in China last fiscal year totaled $2 billion 500 million, accounting for more than 10% of its total sales of $24 billion 100 million.

Leon estimates that China has contributed 30% of its operating profit to the sports equipment giant.

In June this year, Nike's share price had its biggest decline since December 2008, after the unexpected fall in the fourth quarter of December 2008, and the slowdown in demand in China.

China's orders increased by 2% in the fourth quarter, compared with an increase of 20% in the third quarter.

Lyon said that the problem is that as China's demand deteriorates, international brands like domestic brands and Nike are resorting to discounted promotional tools to solve a large number of inventory problems.

The analyst found that all samples of Lining's store, the third largest sports brand in China after Nike and Adidas, were sold at thirty percent off, after sampling in Shanghai's stores, he said.

The goods are sold for forty percent off and the garments are sold at sixty percent off.

Lyon points out that sportswear in China's Nike is selling at a price of thirty percent off to 25% off, and Nike is still striving to change the type of clothing and pform from leisure sports style to functional line.

Lyon commented that no brand can avoid this level of discount sales, even if it is Nike. In fact, we think Nike needs three to four quarters to control inventory.

Lyon pointed out that Lining will close 3000 of the 8000 sales points, which also cast a shadow over the overall stock market situation.

The sale of these brands is also not a good thing: he said, for example, the five floor of the Lining store is next to a Nike's own store and a four tier Nike distributor store.

He said that although Nike enjoys the advantage of high-end brand position, the accumulation of promotional activities will inevitably affect consumers' purchase decisions.

Lyons adds that Nike can solve the problem of excessive inventory in the us through factory outlet stores, but Nike has not yet established a similar network in China.

Nevertheless, he pointed out that Nike is setting up guerrilla stores or temporary outlets to help clean up excessive inventory.

Mike, an analyst at UBS, said Nike is likely to increase the discount to local retailers at the expense of profit margins, so as to increase Chinese orders. (Mike Binetti)

We think Nike is striving to create a positive future, he said.

Binet has just returned from China.

He said Nike is now moving cautiously.

Nevertheless, Binet said,

The acceleration of demand growth is enough to offset the adverse effects of China, as well as the surplus.

Analysts in the FactSet survey say Nike's profit will drop from $1.36 per share to $1.12 per share on Thursday when it is expected to release its earnings.

Analysts expect sales to rise from $6 billion 80 million to $6 billion 430 million, driven by demand from the US.

Apart from China, Wall Street is still concerned about European demand, and Europe is also an important overseas market for Nike.

Christian Buss, an analyst at CreditSuisse, said that the strong performance of the North American market may be offset by the continuing downturn in the European market and the challenges of the Chinese market. These two factors are restricting Nike's upward potential.