Behind Nike's Beautiful FY2019 Earnings Report Is The Three Biggest Anxiety Of The First Place.

"For China, we are still a brand in China, and we are proud of Nike's investment and established relationship in this dynamic market. We believe Nike will continue to work with Chinese counterparts in sports development and business activities in the future." In Nike's 2019 Quarter Fiscal Year fourth quarter conference call, Nike's chairman and chief executive officer, Mark Parker said.

Recently, Nike released the fourth quarter of fiscal year 2019 and the full financial year financial report. The report shows that the annual revenue of the Greater China region has broken $6 billion, becoming one of the brightest growth points in the annual report.

Although Nike's earnings per share did not meet market expectations, the stock price fluctuated after the announcement of the earnings report, but in general, Nike's performance in the 2019 fiscal year was quite bright.

Nike's earnings highlights: Q4's total revenue has broken billions, and FY19 revenue has broken 6 billion in Greater China.

Financial reports showed that Q4's revenue in fiscal year 2019 was $10 billion 184 million, up 4% from the same period last year. In the 2019 fiscal year, the total revenue was $39 billion 117 million, an increase of 7% over the same period. In the 2019 fiscal year, the gross profit margin in the fourth quarter and the year was 45.5% and 44.7% respectively. Nike said that under the reform of product innovation and digital drive, the growth of consumer demand stimulated the growth of revenue.

Looking back at the business in fiscal 2019, it has brought about a key growth in sportswear, Jordan brand and running category, with footwear and clothing reaching a two digit growth rate. It is worth mentioning that the CONVERSE series has reached $1 billion 900 million in revenue, mainly due to the growth of sales in Asia and online electricity providers, and the contrast with the decline in the European and American markets.

In the past year, Nike's growth has been dominated by wholesalers, with revenue of $25 billion 423 million, an increase of 10%. The revenue of CONVERSE's direct channel has reached 11 billion 753 million US dollars, an increase of 16%. The main reason is that besides the increase of offline stores, the revenue of electricity business has increased by 35% over the same period, which has made a great contribution. E-commerce sales have increasingly become an important marketing channel for Nike.

The annual net profit was $4 billion, diluted by US $2.49, although Nike's revenue growth accelerated, gross margin and tax rate declined in the 2019 fiscal year. However, it involved higher costs in brand marketing, new product launches, and digital R & D innovation driven by digital terminals, which offset the growth benefits brought by the former.

At present, the total inventory of Nike is about $5 billion 600 million. In all regions, the overall inventory level is still in a relatively healthy state.

In addition, because of the stock repurchase and related infrastructure investment, Nike's cash reserves decreased by 582 million US dollars compared with the same period last year, and the amount of cash and cash equivalents and short-term investments amounted to US $4 billion 700 million.

For the domestic market, the report shows that the annual income of the Greater China region reached 6 billion 208 million US dollars, an increase of 24%, of which the income of footwear brands was the main revenue, reaching 4 billion 262 million US dollars. At present, the Greater China region is the third largest market of Nike. The top two are the North American market and the European and African market, but the growth rate is far lower than that of the Greater China region. In the future, Nike may concentrate more on the domestic market and explore the market potential of the Greater China region.

According to the information read in the earnings report, the development of Nike will be in a relatively stable growth period in the future. When predicting the strategic direction of Nike's future development, several key words are worth discussing, namely, Greater China, her economy and digitalization drive.

　 Greater China region

As for the information disclosed in the fiscal year 2019 report, the overall revenue in the Greater China region is not too amazing. At least there is a big gap compared with the revenue of 10 billion 45 million dollars in North America. The point of concern is the growth rate of over 20% in the year, which is the potential of the future, and perhaps also the most valued by Nike.

In the conference call, Mark Parker said Nike's biggest growth came from the e-business platform, which coincided with the current largest entry into the domestic market, e-commerce. Inevitably, after the brutal growth of domestic electricity providers, the industry gradually entered the standardization period, the end of the traffic dividend, Matthew effect appeared. But this will be a positive opportunity for a strong brand manufacturer.

There are both opportunities and challenges. The Greater China region has a large population and is a high-profile consumer market. In sports brand, Nike is facing not only the challenge of foreign brand Adidas, but also the local brand of China gradually showing its head and showing its strength.

Anta ranked 21 in the world's 50 most valuable clothing brands in 2019, released by Brand Finance, the world's leading agency. It ranks third among the world's sports brands. In Anta's 2018 earnings report, its revenue reached 24 billion 100 million yuan, an increase of 44.3% over the same period last year. It is a strong competitor in the Chinese market.

The Greater China region has great potential in the future sports market, but the chance of Nike's dominance is not big. How to brand localization and release the brand effect is worthy of Nike's continuing exploration. Whether Nike is still China's brand is not just what Mark Parker said, but also if Chinese consumers have a deep understanding.

Her economy

Nike's entry into the women's market is no longer new. In March 25th of this year, Nike held a grand expedition for the Chinese women's football team. The vice president of Nike, Ms. Dong Wei, general manager of Greater China, and young actress Dongyu Zhou attended the promotion. We can see that Nike's next focus market is "her economy".

Mark Parker said in a conference call that it brought strong two digit growth for sportswear footwear and apparel in the current quarter, and accelerated in the first half of the women's World Cup. Although the information disclosed in the earnings report is not large, it shows that in the wholesale channel, the revenue of female products reaches 7 billion 380 million US dollars, and the growth rate is 11%. Indeed, Nike can see that her "economic" benefits are good.

Since the concept of "her economy" has been put forward, the female market has become an important module that can not be ignored, and has become the focus market of some special categories. Nike's focus shift has become a trend, and will continue to increase investment and operation of the module in the future.

Mark Parker said that in the latter part of this year, according to the research of women's body type and body shape, the clothing for the Asian market will be matched with local women's characteristics. The new consumption experience brought by digitalization drive will become the explosion point to further promote women's business. It can be seen that the future market of Nike lies not only in the Greater China region, but also in "her economy".

Digitally driven

Whether it's a talk on the teleconference or information disclosure in the annual earnings report, digitalization drive is always an important point in Nike's future strategy. This is a comprehensive strategic drive, from R & D, user experience to consumption, landing point lies in two places, data and online.

In the 2019 fiscal year, the main module invested by Nike was to improve data acquisition and analysis capabilities. Data played an increasingly important role in sports brand. At present, Nike is investing in responsive production, that is, pull supply chain, which needs to optimize data processing capability in inventory and information transfer, and greatly synergy supply chain upstream and downstream operations.

Under the stimulation of consumption upgrading, personalized service gradually becomes brand competitiveness. Besides the men's wear market, the women's clothing market and children's market are rising, and the demand for precise data is increasing. The data of individual type, group demand and regional consumption data are becoming the trend of economic growth driven by data.

Secondly, the impact of online economy on the real economy continues to be affected, and the layout line has become the focus of Nike. In the 2019 fiscal year, Nike's electricity supplier grew by 35% throughout the year. It is expected that e-commerce will occupy 30% of Nike's total business in 2023.

In the conference call, we learned that the online layout of Nike is not simply an incoming business. How to cooperate with online and offline data to create new concept shops is the focus. There are two such shops in New York and Shanghai.

In the process, Nike has put forward various practical solutions, such as Nike FIT, which can scan the feet of consumers through smart phones to get footwear sizes, match shoes accurately and so on. As a result, supporting products to promote the sale of sports products has become a major development trend of Nike in the future.

The real situation of Nike: the first place in anxiety

In the 2019 fiscal year, the brightest earnings data undoubtedly declared to the market that Nike maintained the industry's first sovereignty. In the current world sports brand, its strength and status can hardly be shaken temporarily. However, in the real market competition, Nike's first place is not so easy to run. It always reveals some anxieties.

From the perspective of the industry market, the sport brand is becoming wider and wider, and there has been a cross border race. Since the emergence of the concept of intelligence, it has empowered products of sports equipment, clothing, footwear and so on, which has produced more new experiences. It has also encouraged the companies that did not belong to this track to enter the sports brand market and began to disperse the market flow.

Alphabet's life science department Verily is developing a smart shoe with embedded sensors to monitor user's movement, weight and so on. In addition, the wearable intelligent sports devices are crowded with technology companies from all over the world. In the past, they were impossible for Nike to meet.

However, in the era of AI empowerment, the boundary of the industry is blurred, and the boundary of products is also blurred. Intelligent equipment is the future, maybe Nike is also very clear about this. It is also an intelligent device. Unfortunately, as the industry leader, Nike's Nike Adapt BB sneakers are full of gimmicks, and the market performance has been very mild. So far, it has not yet been able to lead the development of intelligent industry as a whole.

From the perspective of competitors, the brand of the cutting-edge sports brand is fierce. It is running at full speed against Nike's first place. Andrea is one of the most prominent ones. The highly active younger brother once surpassed Adidas in the North American market and ranked second. Although there is still a gap between Nike and Nike in terms of sales and revenue, the strategic grasp of marketing is indeed enough for Nike to defend.

Andemar's product positioning is accurate, cost-effective, in marketing with more heat, topic of high celebrity cooperation, from Curie, Obama, Brady to "megalith" Johnson, it can be said that the focus of the market has always focused on its own brand. With many celebrities sitting on the stage, combined with their own high quality products, Andemar was once loved by many elite users. Lei Jun wore Andemar's costumes in many occasions.

In the latest news of June 2019, Andrew signed Yang Chaoyue as spokesperson, intending to go deep into the Chinese market, open the flow entrance of the domestic market and embrace ordinary consumers. In other regions, relatively weak performance, the performance of FY2019 in the Greater China region is undoubtedly a new growth point for Nike. In this way, it is inevitable to compete with Andemar in the same position and have some unforeseen growth risks.

Judging from Nike itself, it has not been plain sailing in recent years. From the "National Anthem" event, the players become Nike spokesmen to the "sex discrimination" incident to expose the resignation of senior executives, and then to this year's "explosion shoes" incident, Nike's marketing, management and products are in different degrees of negative impact.

These negative events have caused different degrees of decline in Nike's share price, which has lost billions of dollars in value and has become an obstacle to Nike's growth. To return to Nike and sports brand market, this veteran enterprise has been seeking reform and transformation, and the market is changing. The new competitors join, the late striving to catch up and the uncertainty of the marketing market make it face more severe test.

In front of Nike, it is a very realistic situation. The first person in need of peace needs to be prepared for danger and seek further reform and transformation.

The core of Nike's Transformation: offensive consumers

In the period of Nike transformation, a strategic direction "Consumer Direct Offense" was put forward. The literal translation is "direct attack consumers". Although some are simple and crude, they are very suitable for the future market direction.

The purpose of attacking consumers directly is to have an in-depth understanding of the needs of consumers and provide satisfactory services for them. This is the case in the development of the market. The emergence of e-commerce has cut off many intermediate links of sales, and directly faced consumers by manufacturers. Not only is the two cost generated by product circulation, but also a barrier between manufacturers and consumers.

The trend in the future is how to accurately acquire and satisfy the needs of consumers has become the direction of Nike's transformation. In the past year, Nike has committed itself to this, and also attributed the results of this financial report to this.

As Mark Parker said in its earnings report, innovation and digital advantages stimulated our brand growth, and also promoted our deeper relationship with global consumers.

At this point, the direction of Nike is undoubtedly correct. In the future sports brand market, the focus of enterprises may always be consumers.