How Nike Reversing The Slowdown In The Domestic Market Has Become The Key.

Global

Tycoon

In North America

In the hard struggle, there was a long road ahead of digital pformation, followed by Adidas.

Although the growth of the international market is still strong, the North American market is still the largest single market of Nike. How to reverse the slowdown in the domestic market is related to whether Nike can take the lead in the first place.

Tmall double 11 of the carnival has been getting far away, but the Nike flagship store has become the first day of Tmall to finish the first single day to break 1 billion yuan merchant's scenery is still impressive.

In addition to the huge volume of Nike itself, the achievement of such a remarkable achievement can not be separated from its active embrace of the new retail strategy.

In fact, compared with its old rival Adidas, in 2015, it put forward the strategy of "setting up the new company". Nike faced a slight hesitation in the face of the new consumption scene becoming the mainstream and the new generation of consumer groups constantly manifesting itself.

Even now, Nike is also trying to prove that it is still the number one sports company in the world by opening up the integration of data intelligence and business scenarios through the integration of data intelligence and business scenarios. However, Nike's performance in the North American market and the international market is a double event.

According to the world clothing and shoe net, Nike released its 2018 fiscal year ended November 31st as the second quarter financial report shows that Nike revenue during the quarter was $8 billion 600 million, an increase of 5% over the same period, excluding exchange rate factors, an increase of 3% over the same period.

During the reporting period, Nike diluted earnings per share of 46 cents, exceeding the market forecast of 40 cents, but lower than the same period last year 50 cents, down 8% compared to the same period last year, which is mainly attributable to the company's gross margin decline, sales and management expenses rise.

During the reporting period, Nike gross margin fell by 120 basis points to 43%, mainly attributable to the adverse effects of changes in foreign exchange rates and the rising cost of unit products.

At the same time, the report shows that during the reporting period, Nike's net profit fell 9% to 767 million U.S. dollars over the same period.

Mark Parker, chief executive of Nike, said that in the second quarter, under the "Consumer Direct Offense" strategy, the growth rate of Nike's international market was accelerating. Nike is also continuing to develop its momentum towards the domestic market.

Mark Parker said that in the first half of the fiscal year, Nike's innovative lineup is as strong as ever, and Nike will actively reshape the retail format through differentiated experience.

However, Mark Parker's positive attitude did not remove investor concerns.

In the early morning of the following day, Nike shares fell 7.2%, the biggest decline in nearly 9 months, mainly due to the continued decline in the performance of Nike base.

It is interesting that in the past 10 quarterly reports, Nike's overall performance is better than market expectations, but Nike's stock has dropped 6 times after its performance, which is also attributed to Nike's troubles in its base camp.

North American market performance continues to decline

The two quarter earnings report showed that Nike North American market income fell 5% to 3 billion 485 million US dollars.

In the first quarter, the Nike North American market fell to 3% year-on-year.

It can be seen that after a quarter of adjustment, Nike did not reverse the decline in the North American market, and its performance has not improved.

Nike shoes Stadium

Nike's North American market has seen a more serious drop in profits.

In the second quarter, the pre tax profit of Nike's North American market was $783 million, down 14% from the same period last year, which is the only area in which Nike has fallen in the global market.

Nike attributed it to sales, general services and increased management expenses.

Andrew Campion, chief financial officer of Nike, expects that in the third quarter, the sales activity in the US market will still pressure the profit margin of the market.

It also means that profits in Nike's North American market are likely to continue to decline in the three quarter.

Although Nike performs better in other markets than Wall Street expects, the North American market is the largest Nike base and has the largest share of Nike's revenue.

In fact, Nike is not not aware of the problem.

In the investor day activity held two months ago, Trevor Edwards, President of Nike brand, said that the retail environment in the North American market is undergoing changes. Consumers want more innovative concepts, more creative products, more speedy distribution and more personalized experience. This is everyone's chance. Those non differentiated and mediocre retail outlets will be eliminated.

"Non differentiated retail has been a powerful tool for large-scale expansion, but today, the attraction of digital retailing to consumers is obviously greater."

Trevor Edwards said Nike will accelerate the retail revolution in the North American market with the guidance of innovation, speed and digitalization.

In order to revive the North American market, Nike has adopted a series of measures to enhance the consumer experience, including cooperation with well-known e-commerce providers, efforts to build their own online shopping mall, and reduce the number of retail outlets.

In June of this year, Nike changed its attitude toward death for many years and announced that it would sell products directly to American consumers on Amazon.

In December 21st, during the second quarter earnings response to investors, Nike regional and fusion market President Elliot Hill revealed that Nike and Amazon's experimental cooperation project achieved good results. Cooperation will continue and be promoted worldwide.

In addition to hand in the well-known business, Nike is also making efforts to build its own online shopping mall, hoping to get through online and offline services.

In November this year, Nike.com and NikePlus member services were reinstalled.

In December, Nike announced that it plans to open a new flagship store in New York and is expected to open in early 2019, mainly to expand the user's digital experience.

However, in this year's "black Friday" promotional activities, Nike website unexpectedly appeared a technical failure.

Last month, many consumers complained about their lack of access to Nike's apps in social media.

Randall Konnik, analyst at the United States, said that Nike's outlook in the North American market is not optimistic. Although the brand and sports shoes and clothing are still stable, fierce market competition means that it is not easy to raise market share and raise profit margins.

Randall Konnik said: "Nike's old rival Adidas is a bit aggressive now. In view of the fact that Adidas does not have a high proportion in the North American market, Adidas is still likely to continue to encroach on Nike's market in the future."

Nomura Securities retail analyst Simon Schil said that although Nike's pformation mentality is clear, it will not be smooth sailing. Even if investors want to hold Nike shares for a long time, Nike should also use its performance to speak.

Analysts at sasqui Hanna financial group think it is hard to say when Nike will be able to reverse the declining trend of its base business. In view of the size of Nike, it is expected that it will be able to see signs in the middle of 2018.

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Greater China performs well

Despite the setback in the growth of the base camp, Nike's performance in the international market is still commendable. International business revenue has accounted for 55% of Nike's total revenue, especially in the Greater China region.

According to the financial report, in the second quarter, Nike's revenue in the Greater China region was US $1 billion 222 million, an increase of 16% over the same period last year of 1 billion 55 million US dollars, excluding the exchange rate factor, an increase of 15%.

Like Greater China, Nike has also performed well in Europe, the Middle East and Africa.

In the second quarter, Nike's revenue in Europe, the Middle East and Africa was $2 billion 133 million, an increase of 19% over the same period last year of 1 billion 792 million, excluding the exchange rate factor, an increase of 14%.

The growth rate after excluding the exchange rate is second only to that of the Greater China region.

It is worth mentioning that during the quarter, Nike's performance was good at the China double 11 Shopping Festival.

In the Tmall double 11 outdoor sports category list, Nike won the first prize.

Double 11 began less than 1 minutes, Nike official flagship store sales exceeded 100 million yuan, sales exceeded 1 billion yuan that day, became the first Tmall apparel category breakthrough 1 billion yuan merchants.

This excellent performance has also made Nike one of the high-frequency words in Tmall's response to investor questions.

With the help of online channels such as Tmall and Nike.com, as well as offline outlets such as direct stores, retail stores and complex stores, the layout of Nike directly facing consumers in the mainland of China is gradually improving.

On this year's Shanghai International Marathon, Nike also introduced customized Nike+Run Club running service, providing exclusive training programs for runners, and Nike+ running application software became the only official mobile phone application partner.

In the second quarter, in Greater China, Nike's direct consumer business grew by more than 30% over the same period last year.

Mark Parker said that at present, international business revenue accounts for about 55% of the total revenue; in the next 5 years, the growth of Nike's 75% revenue will come from international business.

From Mark Parker's statement, we can see the importance of international business in the future layout of Nike.

The question now is whether the increments brought by emerging markets can continue to fill Nike's base camp.

In fact, not only the Nike family has encountered this problem, but also the international brands such as Starbucks are facing the same problem. How to break Nike is worth paying close attention to.

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