Nike'S Decline Will Revive Its Business In North America

To a certain extent, the days of retailers are becoming more and more sad because of the double attack of the decline of people's flow and the aggravation of online competition.

The indirect cause of declining retail sales.

But when Nike's growth in the North American market is blocked, Nike's performance in the Greater China region is commendable.

This is due to Nike's strong sports energy and heat injected into the Greater China market.

The success of the Chinese market will help Nike achieve sustainable growth worldwide and Nike's confidence in revitalization of North American business.

According to the world clothing and shoe net, recently, Nike released the first quarter of fiscal year 2018 as of August 31st, the first quarter, Nike's income amounted to $9 billion 70 million, excluding exchange rate factors, compared with the same period last year's $9 billion 60 million basically unchanged.

Among them, excluding exchange rate factors, Nike

The revenue reached 8 billion 585 million US dollars, up 2% over the same period last year, mainly benefiting from the growth of income in Greater China, Europe, Middle East Africa and Asia Pacific Latin America.

Brand revenue of $483 million, down 16% from a year ago, is mainly dragged down by the decline of business in North America.

During the reporting period, Nike reported diluted earnings per share of 57 cents, exceeding the market forecast of 48 cents, but lower than the 73 cent of the same period last year, which is mainly attributable to the decline in gross profit margin, the increase in effective tax rates and other expenditures.

During the reporting period, Nike's gross margin dropped by 180 basis points to 43.7%, mainly attributable to the adverse effects of foreign exchange rate changes and the increase in the proportion of price promotions.

Mark Parker, chief executive of Nike, said that in the first quarter, through the new "ConsumerDirectOffense" strategy, we seized short-term opportunities.

Next, with our strong brand, innovative products and the most personalized and digital experience in the industry, we will push Nike's global growth to the next level.

The growth of the base camp is now weak.

However, behind Mark Parker's positive attitude, Nike is helpless in the growth of the North American market.

Earnings showed that in the first quarter, Nike's revenues in North America amounted to $3 billion 924 million, down 3% compared to the same period last year.

Andrew Campion, chief financial officer of Nike, said at a conference call of investors that the decline in North American income was mainly due to the adverse effects of short-term promotional activities. However, the continued growth of NikeDirect business partly offset the adverse effects of discounts.

Andrew Campion said that in the short term, the main measure of success in North American business will be the growth of NikeDirect business and the improvement of consumer experience.

Bloomberg pointed out that Nike's weakness in North America is not surprising.

In fact, in August, the quarterly results of some of Nike's most important retail partners, FootLocker and FinishLine, were worrying. It has already indicated from the side that Nike's performance is nowhere near.

To a certain extent, the days of retailers are becoming more and more sad under the double attack of the decline of people's flow and the aggravation of online competition, which is the indirect cause of the decline of Nike's retail sales.

But the truth is not so simple.

These retailers originally wanted to rely on Nike to boost traffic and sales, and did not expect Nike's sales to fall short of expectations.

Richard Johnson, chief executive of FootLocker, bluntly pointed out that Nike's Jordan brand had a significant decline in sales compared with the same period in history, and Nike's high-end sports products lacked some exciting new styles.

Although there are big environmental factors, what is more important is that Nike's own products have problems. The attractiveness of Nike brand to North American consumers has declined, and the data confirm this.

In the first quarter of Nike's earnings report, NPD group released data show that in August, Adidas has surpassed Nike's Jordan brand to become the second largest sports shoes brand in the United States.

Although the Jordan brand is surpassed by Adidas, this does not mean that Nike has had a big trouble, after all, Nike is still far ahead of Adidas in North America, but it does mean that Nike has come to a crossroad in the North American base, and there are still a lot of improvements in its products.

Assets analyst at Fortune Management Inc D.A.Davidson said that although Nike has encountered some troubles in the North American market, Nike has been on the road of recovery, but Nike's main retail partners will continue to struggle because Nike's strategy toward direct consumers will continue to tilt towards the digital platform.

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Greater China is unique.

In contrast to the weak performance of the North American market, Nike's performance in the international market is pretty good. Its international business revenue has accounted for 55% of the total revenue, especially in the Greater China region.

According to the financial report, in the first quarter, Nike's revenue in the Greater China region was 1 billion 108 million US dollars, an increase of 9% compared with 1 billion 20 million US dollars in the same period last year, excluding the exchange rate factor, an increase of 12%.

Nike not only recorded double-digit growth in Greater China, but also deepened its relationship with Chinese consumers.

During the quarter, Nike injected strong sports energy and enthusiasm for the Greater China market, bringing C, Lebron James, Carey Owen, Kevin Durant and Russell Westbrook to other giants.

The visit of these superstars further deepened the relationship between athletes and fans signed by Nike.

This heat is also reflected in the flow and sales volume, boosting Nike to become Tmall's No. 1 sports brand.

In August, Jordan's official flagship store landed on Tmall. This is also the official flagship store of the Jordan brand world's first third party e-commerce platform, which is different from Nike's official website and offline stores.

Just 10 days online attracted 2 million consumers to come to buy.

In addition, in order to fully tap the growth potential of the Chinese market, Nike also launched the largest flagship store in Asia on the world trade scale in Beijing, in partnership with Baosheng international partners.

The great success in the Chinese market has also given Nike confidence to revitalize its business in North America.

Trevor Edwards, President of Nike brand, said at the investor conference that regardless of the situation in the US retail market, our success in the Chinese market will help us achieve sustainable growth worldwide. We are confident of the growth of Nike brand in the future.

Analyst weapon

After the release of Nike's earnings report, many analysts maintained a neutral rating on Nike's stock. Although Nike was temporarily in trouble in the North American market, Nike's brand strength is still strong, and there is still room for adjustment.

The good news is that Nike's management has realized the problem, and launched the ConsumerDirectOffense strategy in June this year to better provide personalized services to consumers. Specific measures include the use of digital power to speed up innovation and product development, closer to consumers in key cities, and deepening the one to one relationship.

Some analysts suggested that in order to revive the US business, Nike needs to regain its strategy of less than demand, especially in the basketball series and the Jordan brand series.

Analysts at SARS Hanna financial group point out that Nike seems to misestimate the market's demand for some of its high-end basketball products, resulting in an oversupply, rather than an expected supply.

Maintaining balance between scarcity and scale is a challenging task, but this is a key response to protecting the health of Nike brand and stabilizing business in North America in the second half of fiscal 2018.

Analysts at SARS Hanna financial group believe that Nike's contraction in the number of brands released by Jordan and high-end Nike products (Durant, James, Kobe and others) is correct.

However, we are not doing enough. We are still worried about oversupply.

In addition, Nike's marketing strategy failed to connect with customers.

"Encouraging those excellent leaders in marketing and product positions to bring their creativity to stimulate growth may be good for Nike."

"We think Nike's US business will eventually return to normal, but we are not sure how long this process will take, because Nike's response strategy is not entirely in place," said the Research Report of SARS Hanna financial group.

Analysts at brokerage Wedbush believe that the root cause of Nike's difficulties lies in Nike's own brand, strategy and product problems, rather than changes in the local market environment.

However, unlike the SARS Hanna financial group analyst, Christopher Seve Zeeya, a brokerage analyst at Wedbush, argues that Nike's product supply is not too much, but too little.

"The new series of products seems to be in short supply (the supply of 1 million pairs of VaporMax running shoes a year is far from meeting market demand").

Analysts at Instinet, a brokerage firm at Nomura, believe that Nike's cost control is worth praising, but the revenue driven by SG&A (sales, management and administrative expenses) is expected to exceed the expected "insufficient gold content".

According to the financial report, Nike's sales and management expenses fell by 1% to $2 billion 900 million in the first quarter of fiscal year 2018.

"We still believe that Nike's competitive advantage lies in its size and its ability to crush its competitors in the sport of burning money," said Instinet analyst.

If SG&A is too low, this means that the threshold for rivals to compete with Nike will also be lowered. "

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