Nike100 Billion Dollars In Revenue, But Lingering At The Crossroads?

Sportswear giant Nike has released its latest report. The results showed that in the third quarter of fiscal 2019, the revenue in the third quarter was $9 billion 611 million, up 7% over the same period last year, which is roughly consistent with analysts' expectations. The group's net profit in the third quarter was 1 billion 101 million US dollars, up 19.54% over the same period. In 2019, Nike's stock price has been performing well. Now it has risen about 18.7%, and its total market capitalization is about 138 billion 500 million US dollars.

It is noteworthy that the Nike Greater China market is still strong. During the reporting period, sales in the Greater China region increased by 19% to $1 billion 590 million over the same period, excluding the impact of the exchange rate, and the growth rate was 24%, achieving double-digit sales growth for nineteenth consecutive quarters. Andy Campion, chief financial officer of the group, said: "despite the uncertainty of tariff issues, the growth momentum of the Chinese market continues to lead."

From the regional perspective:

Nike's total revenue in Europe, the Middle East and Africa was $2 billion 435 million, compared with $2 billion 299 million a year ago.

Asia Pacific and Latin America achieved 3% growth and sales amounted to US $1 billion 307 million.

North American local sales increased to $3 billion 810 million, up from 7%, but it was no match for Wall Street's financial analysts' forecast of $3 billion 850 million.

After the announcement of the earnings report, analysts said that the Nike business restructuring, focusing on the largest market and improving online business have begun to work. Nike has doubled its online resources to boost product innovation and deepen direct contact with customers, which has enabled Nike to gain more market share from its main competitor Adidas, while promoting the growth of major Asian markets.

In addition to direct sales to enhance the company's contact with consumers, analysts also optimistic about the speed and variety of new products launched by Nike. Wedbush analysts pointed out earlier: "the new shoe style has been quickening its pace, covering a wide range of products, and focusing on sports products such as basketball and other key areas. To some extent, Nike is recovering growth. "

On the whole, Nike handed in a commendable spancript. However, no brand can be evergreen, and if we want to sit on top of the industry's top priority, Nike will have a lot of haze ahead.

In the North American market, sales are not as good as expected.

In Europe and greater China, Nike, which has been on the way, has come to a head in the local market.

Chen Grazutis, an analyst at Bloomberg think tank, said: "at present, the development of Nike is like a" Shuangcheng book ". The growth of international business has obviously increased, but the development of North America is still not satisfactory.

To reverse the decline in the North American market, Nike has optimized its retailer structure, cooperating with large chain retailers Foot Locker and boutique differentiated retailers, e-commerce platforms and social media platforms. However, in the latest earnings report, Nike sales in North America increased by 7% to 3 billion 810 million US dollars, down 10% from analysts' expectations. After the announcement of the earnings report, Nike shares fell 4.54% to 82.19 U.S. dollars. The industry believes that the main reason for the fall in share prices may be the failure of Nike in North America.

At the same time, rival Adidas is constantly nibbling the market share of Nike stronghold. In recent years, Adidas has not only worked with celebrities such as Kanye West and Pharrell Williams, but also has taken away Nike designers, trying to compete for a share in the fashion leisure sports shoes market. Driven by measures such as increasing freshness and flow of stars, Adidas has been strong in the North American market, continuing double-digit growth, with sales surging 14.9% to 4 billion 689 million euros.

In addition, the sports brand Skechers, which also originated in the United States, is stepping up its efforts. In June 2018, Skechers ranked second only to the first Nike in the US market. The industry footwear media "Footwear Insight" recently released the North American consumer footwear brand satisfaction survey report, of which Skechers in the "checkout speed, customer consumption value, the choice of goods category" in the three major items respectively achieved 47%, 41%, 38% of the consumer recognition, exceeding Nike, get the three consumers shopping experience satisfaction highest score.

The development of sports industry in North America is mature and the consumption demand is large. Insiders pointed out that Nike's outstanding performance in the past ten years owes much to the lack of substantive competition in the industry. However, under the pressure of Adidas, Nike's North American market is facing difficult challenges.

More fatal, analysts pointed out that before 2024, the compound growth rate of the sports shoes market was about 2%. At present, Nike sports shoes account for about 61% of its total revenue. If we do not quickly adjust product categories and take breakthroughs in performance, the growth space of Nike will be extremely limited in the future.

What is the crisis behind the Greater China region?

According to industry analysis, after Nike lost its North American market, the Greater China region, represented by China, will become the main battleground for Adidas and Nike. Judging from the latest financial reports, the two giants are equally divided in the Greater China region. However, it remains to be seen whether Nike can stand firm.

First, for the sports brand, the star cargo effect is particularly important.

Gaining traffic from the stars is one of the most important weapons. Despite the constant development of sportswear, sports shoes account for a great deal of Nike performance. Take basketball shoes as an example, the ability of carrying NBA cargo stars can not be underestimated. This also means that Nike must sign the hottest stars as far as possible and occupy the shoe market with its cargo effect. However, in the competition for stars, Nike spokesmen are hard to compete with Adidas.

Wall Street's knowledge and statistics show that in the 2019 Sherlock all star game, 22 of the 30 stars representing the top NBA level are in Nike or their Jordan brand. However, despite the large number of Nike spokesmen, rolling numbers do not mean the long-term stability of the Nike shoe court. In the remaining 8 Traffic balls, there are four years and three champions of the Jinzhou warriors as the star of the football league; last season regular season MVP played for Houston Rockets player Harden, who has a large number of Chinese fans. These two have the ability to take the "one stop ten" and the strength on the field.

In contrast, Nike, Jordan and Kobe have become the past tense. At present, only 34 year old veteran James, who is in the late career period, is supporting the flow force. At this stage, the appeal of spokesmen can not compete with Adidas.

In addition, in 2018, tennis heavenly king Federer and Nike broke up their influence on tennis. The industry pointed out that if more spokesmen launch contracts in the future, they will have a greater negative impact on the Nike market.

On the other hand, the first financial pointed out that in China, traffic stars have absolute dominance. Some analysts point out that sports brand and entertainment stars, especially young idols, complement each other. Brand products are highly compatible with fans. This also means that with the help of a spokesperson with a large fan base, it will open up the Chinese market with half the effort.

In the marketing battle between Nike and Adidas, the spokesperson strategy of Nike is biased towards sports stars. However, Adidas's spokesperson's harvest strategy is more biased towards the popularity of popular stars on social networks.

From 2017, Adidas first signed in May, Lu Han became the brand spokesman of Greater China. After that, Di Ali Gerba signed the latest brand image spokesperson of Neo. In November, Adidas Neo once again announced that it was easy to become a spokesman for the image. In December of the same year, Adidas invited Yang Mi to become the spokesman of its brand new Greater China brand. At present, many popular artists including Angelababy, Eason Chan, Fan Bingbing, Eddie Peng, Janine Chang and Zheng Kai have reached a cooperation agreement with Adidas.

In the China's most commercial list of stars announced by the first financial weekly, Adidas spokesperson's position is very close: Lu Han topped the list, Yang Mi ranked third, and Di Ali Gerba, Angelababy, and Yi Jin were among the top twenty.

With the rapid monopoly of Adidas, the position for Nike has been limited.

Second, Nike, which is deeply involved in women's discrimination and shoe exploding, is facing great pressure of public opinion and public relations.

In February this year, the NBA quasi champion Zion Williamson took less than 1 minutes to get hurt because of the sudden burst of Nike PG2.5 basketball shoes on her feet. The quality of Nike products was greatly questioned. The stock price of the stimulus group fell and the market value was evaporated by 1 billion 300 million US dollars.

In addition to quality problems, Nike is also facing a more difficult test of women's rights.

Last year, the Wall Street journal concentrated on revealing a series of problems arising from the prevalence of patriarchal culture such as gender discrimination and improper personnel management in Nike. It is reported that there is a gap in the overall salary between male and female employees in Nike group, and less than 30% of female vice presidents in the group. Subsequently, a number of Nike female executives resigned. Although the specific reasons were not disclosed, there was news that it was related to the behavior and unfair treatment of executives who did not respect women.

As a matter of fact, Nike has long affected the development of women's products. Women's products on Nike's official website are about 20% less than that of men's products, according to fashion news. In order to make up for the short board, Nike group has publicly stated that the female consumer market has not been fully developed, and will invest more in female products in the future.

However, according to Merrill Lynch, in the future, brands with more environmental, social and corporate responsibility will be favored by the younger generation, and social justice has become the way to the hearts of young consumers. McKinsey used "smart and old" to describe this new generation of main force. In other words, social morality is not only a marketing way, but also a consistent business philosophy of enterprises.

Some analysts point out that the social problems faced by Nike will greatly affect their expansion in the field of women's products. What Nike needs to do at this point is the complete reversal of the discriminatory atmosphere of the group. This is very difficult for Nike with nearly 80 thousand employees.

The sports industry is facing a fork in the road. What is the next choice for Nike?

In addition to the internal ills of the group and the urgent need to revitalize the North American market, Nike is also facing a more profound industry change.

Facing the old rival Adidas, Nike needs to deal with the spanformation trend of sports industry. In the past few years, in order to cater for the younger generation's preferences, sports brands have been betting on the fashion field. Whether it is Nike, Supreme and other tide brand crossover, Adidas joint Kanye West, or Puma and Rihanna to launch cooperation, fashion elements do bring new possibilities for sportswear.

However, the industry analysis shows that fashion elements can only lead short-term trend. Sportswear is closely related to professionalism. After several years of fashion development, more and more brands will return to professional sportswear in the future. Adidas global CEO Kasper Rorsted has said that in the European market, Adidas relies too much on short-term trends such as fashion sports shoes, and sports equipment sales are not strong enough. In the future, the centre will be put to revitalize sales of professional sports.

Besides Adidas, other sports brands are also making efforts in the field of professional sports. Puma has officially announced its return to professional basketball, inviting JAY-Z to be the creative director of Puma basketball line, signing DeAndre Ayton, Marvin Bagley III and other potential new people. In addition, Arthur announced in February this year that he will adjust the organizational structure of the group and promote the growth of running and core performance sports business.

At the same time, with superior performance, outdoor clothing gradually becomes daily, and the millennial generation began to seek more professional equipment with design sense. Since 2014, the athleisure movement and leisure trend has been rising. This style refers to people's sports and leisure wear except the fitness grounds. The Wall Street journal data show that the athleisure market size is 35 billion US dollars, and it is expected to increase by 40% by 2020.

Canadian Yoga brand lululemon is born in the background of this industry. From the initial stage of its business, it focused on professional fields and urban female elite, and dominated the healthy lifestyle. Lululemon revenue increased from 18 million in 2004 to 2 billion 600 million in 2017. It also proposed the goal of entering the 4 billion dollar club in 2020.

Some analysts pointed out that there are three crises faced by Nike, one is the lack of female products, the two is that clothing accounts for a small proportion, and three is that its cash cow basketball shoes are declining. There is no doubt that when the sports industry enters the second half, professional sports products become brand led, and the short board of Nike will be exposed.