In The Three Quarter, Greater China Increased 24%+, While Pre Tax Profits Increased By 30%, But Nike Still Needed To Control Costs.

The demand in the Chinese market is still strong, but Nike is not at ease in this area. Adidas, which had a 29% surge in sales in 2017, has just announced an Asia Pacific market plan to set Shanghai as a new Asia Pacific headquarters, hoping to further improve its performance in the fastest growing market in the world so as to catch up with Nike as a whole.

In March 23rd, Nike group announced its performance in the third quarter of fiscal 2018.

As of February 28, 2018, Nike's global revenue grew 7% to $8 billion 984 million, up from analysts' expectations of $8 billion 850 million.

Affected by the US tax reform, Nike lost 921 million US dollars in the third quarter and a loss of 57 cents per share.

According to FactSet, a financial data company, the company reported quarterly loss in 1998.

After deducting $2 billion in tax expenditure, earnings per share were 68 cents, 15 cents higher than analysts' expectations.

This quarter, the Great China market once again became the biggest bright spot.

Driven by the Consumer Direct Offense, revenue reached $1 billion 336 million in Greater China, up 24% from a year earlier, and double digit growth was achieved in the 15 quarter.

The pre tax profits in the region increased by 30% over the same period last year, to $496 million.

However, Nike's efficiency in the North American market remained unchanged. In the third quarter, sales in the local market dropped by 6% over the same period last year.

Among them, footwear sales in the region are still weak, while clothing sales growth is flat.

Nike chief executive Mark Parker (Mark Parker) said in the earnings report: "at the end of the third quarter, we have seen signs of reversing the trend in North America."

In this regard, Nike group chief financial officer Andy Campion (Andy Campion) told analysts and investors that the brand sales in North America are expected to resume growth in the first half of fiscal year 2019, the current inventory situation has improved, Nike orders in North America is increasing.

In addition, Nike's sales in Europe, Middle East and Africa increased by 19% over the same period last year, and 13% in the Asia Pacific and Latin America.

The performance of the two regions is excellent.

Driven by the Greater China region, Europe, the Middle East and Africa, the revenue of Nike brand was US $8 billion 500 million, up 4% over the same period last year.

Its brand CONVERSE's revenue was $483 million, down 8%.

Gross margin dropped by 70 basis points to 43.8%, and Nike said it was mainly due to adverse changes in foreign exchange rates, partly offset by falling product costs.

It is worth noting that this is the ninth consecutive quarter of Nike's gross margin decline, indicating that the brand is competing against its competitors through price war.

The results showed that sales and management expenses increased by 11% to $2 billion 800 million over the same period.

The cost of demand creation increased by 15% to US $862 million compared to the same period last year.

Operating expenses increased by 9% to $900 million, mainly due to increased management costs and continued investment in global digital business and NikePlus membership programs.

Pre tax profits fell by 12% to $1 billion 200 million, because the strong growth in most regions of the world was offset by the decline in gross margins and the rise in sales and management costs.

Due to earnings and revenue exceeding analysts' expectations, Nike shares rose 5% in after hours trading on the day of earnings announcement.

In March 18th, Nike issued a statement saying that Trevor Edwards, the brand president, left the company and will retire in August of this year.

According to the Wall Street journal, CEO Mark Parker said in an email to his employees that he had received some reports on the group's internal activities which were not in line with Nike's core values, but did not specify whether Edwards or other executives were involved.

Prior to that, Edwards was seen as a potential successor to Mark Parker.

The third quarter's performance continues to show strong demand in the Chinese market, but Nike is not sitting back in this area.

In the 2017 fiscal year, sales of Adidas, the largest competitor, increased by 29% in Greater China.

In March 14th, Adidas announced a new Asia Pacific market plan to establish Shanghai as a new headquarters in the Asia Pacific region.

The German brand hopes to further enhance its performance in the world's fastest growing consumer market so as to catch up with Nike as a whole.

Obviously, the two big brands' share battle in the Chinese market will continue to be overweight.