Orders Slipped High And Forced Nike To Get Involved In The Promotion Campaign

Recently, sporting goods manufacturer Nike released a quarterly report on fiscal year 2013 (6~8 month 2012), showing that the net profit of the company's first quarter was $567 million, down 12% compared with the same period last year. Its revenue from the Greater China region was 572 million dollars, up 8% from the same period last year, and the growth rate was slower than that of the same period last year.

Meanwhile, the slowdown in the growth rate of Nike's future orders is a foregone conclusion, especially in China.

Nike said that the decline in net profit was mainly due to factors such as cost increase and advertising expenses, which led to a decline in orders due to efforts to clear up inventory backlog and design products suitable for Chinese consumers.

Declining orders in Chinese market

The report shows that Nike's first quarter revenue was $6 billion 700 million, an increase of 9.7% over the same period last year, an increase of 18% over the same period last year. Net profit fell by 12% compared with 645 million yuan in the same period last year, compared with 15% in the same period last year.

Revenue was $572 million, an increase of 8% over the same period last year of 528 million, while the growth rate was slower than the same period last year.

In this regard, the key Road Sports Consulting Co., Ltd. division strategy consultant Zhao Yu told reporters that at present, all brands can not escape environmental impact, "the cost is rising too fast and consumer acceptance has not kept up, which has led directly to the decline of Nike's performance."

Zhao Yu told reporters that the rapid growth of Nike's advertising costs and marketing costs of major events sponsorship is also a cause of profits.

Earlier, Citigroup lowered its rating from buying to neutral because of concerns about the possible slowdown in orders for Nike, while Nike's latest orders are in line with this forecast.

In the fourth quarter of the 2012 fiscal year, sales in Nike China had fallen, and its orders grew from 20% to 2%.

Nike's management says the company is working to develop products that are suitable for the Chinese market and strive to achieve a better balance between casual sportswear and high price functional products.

Inventory rise involved in promotional war

As China's economic slowdown slows consumer demand,

The company's performance has also been affected.

Some shopping malls, close to Nike's domestic brands such as Lining, Anta and so on, have seen 4~6 discount super low discount.

Under the competition of peers, Nike has frequently discounted its products in the Chinese market.

Xiong Xiaokun, a light industry researcher at CIC, believes that the sale of local brands has resulted in a great loss of Nike customers.

"At present, the economy is sluggish, the demand for high-end products is reduced, and the middle and low price products with relatively high price performance are more favored."

He believes that Nike will face the pressure of survival under such circumstances, and the stock will increase.

By the end of 5 2012, Nike's stock had reached US $3 billion 350 million, up 23.39% from 2 billion 715 million US dollars in the same period last year.

"High inventory will seriously affect the capital turnover and continuous operation of enterprises, Nike's current living conditions are indeed worrying, and we need to develop a series of measures to reduce inventory rates."

Xiong Xiaokun said.

Therefore, Nike had to take part in the fierce competition.

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Even so, for Nike's higher inventory, analysts still think it will take three to four quarters to control inventory.

An investment banking analyst said publicly that Nike's business in China is more cautious because of its overstock and excessive discount sales.