With Double Growth In Revenue And Net Profit, Nike'S "Digitization" Road Is Running?

On 19 December, after the US stock market, Nike announced its second quarter earnings in fiscal 2020. Data show that revenue during the period was $10 billion 300 million, an increase of 10% over the previous year, and net profit of $1 billion 100 million, an increase of 32% compared to the same period last year. The diluted earnings per share were $0.70, up 35% from the 0.52 US dollars in the same period last year, all exceeding the market expectations.

However, the gross profit margin of 44% was slightly lower than that of the market, and 44.1% of the market expected. After the announcement of the earnings report, Nike's stock price fell more than 2% after the market. As of press release, Nike fell 2.11% to 101.15 U.S. dollars.

As a world-famous sports brand, Nike has a wide range of products, including clothing, footwear, sports equipment and so on. According to figures released by British authoritative consulting company in the world's top ten sports brand list released in 2019, Nike's international sports brand once again won the top of the list of international sports brands.

Nowadays, Nike has already become the largest sporting goods company in the world. Its advertising words "do not do the next one, only do the first" show its arrogant momentum. But being cold at the top is the first step. From its second quarter earnings report, sales in the Greater China region still maintained a year-on-year growth rate of 23%. Earlier, Nike also said that popularization would still be one of the biggest opportunities for its future growth. But there is fierce competition in this area. Whether it is international brand Adidas or local brand Anta, Lining and so on are all strong competitors. Whether the future can be developed or not is still waiting for the market to further test. The US Stock Research Institute will analyze its future growth potential through this latest financial report.

Double profit expectations for net revenue

Greater China growth is 20%.

The report shows that in the second quarter of fiscal year 2020, Nike realized a total revenue of $10 billion 300 million. Among them, the revenue from the Greater China region was 1 billion 847 million US dollars, up 20% over the same period last year, and the revenue from Asia Pacific and Latin America was 1 billion 468 million US dollars, up 13% compared to the same period last year. EMEA region's revenue was 2 billion 537 million US dollars, up 10% compared to the same period last year. North America's revenue was 3 billion 982 million US dollars, up 5% over the same period. These data show that Nike has shown gratifying growth in all regions.

By brand, Nike brand revenue was $9 billion 800 million and increased by 12% on the basis of monetary neutrality. As a result of the growth of wholesale and Nike direct selling business, the main categories include sportswear, Jordan brand and running shoes, as well as sustained growth in footwear and clothing. CONVERSE's brand revenue was $480 million, and its growth was 15% on the basis of monetary neutrality, mainly driven by the two digit growth in Asia and Europe and the promotion of global digital business.

In terms of earnings, net profit rose 32% to $1 billion 100 million in the first quarter, mainly due to strong revenue growth, gross margin expansion, sales and management costs and low tax rates. GAAP diluted earnings per share increased by 35% to $0.70. Of course, it is noteworthy that gross margin increased by 20 basis points to 44%, but still slightly below market expectations of 44.1%, which has become the main reason for the decline in its share price.

At the same time, Nike also announced its quarterly inventory of $6 billion 200 million, an increase of 15% over the same period last year, reflecting strong global consumer demand, a rise in factory delivery punctuality and a small impact on foreign currency exchange rate changes.

In addition, it is optimistic about the forecast for the third quarter. It is expected that third quarter revenue will grow at a high level and gross margins will remain flat. It is expected that a high digit sales growth will continue in 2020.

To sum up, Nike's overall performance in the new quarter is good as a whole, and its net sales revenue exceeds expectations. And the performance of the Greater China region has maintained a strong growth trend. It can be said that this quarter's earnings report once again proved the strength of Nike's industry head enterprise.

With the upgrading of consumption and the promotion of digital driven strategy, the strong Nike still has the potential to continue to release. However, as the world's first sports brand, it is not without any challenges. After all, competition in this industry is still fierce. Moreover, under the empowerment of AI technology today, it is far more likely than before to overtake the curve. Therefore, Nike is not without worries.

Industry competition intensifies

Nike products are constantly questioning.

At present, for the industry like Nike, it is still difficult for competitors to shake their positions in the short term. However, there are many competitors who are constantly attacking their market share. Whether Adidas is the world's third global Anta, or the new force, Andrew, all of them are doing this. Although the development trend of Andrea is not as good as before, there will inevitably be new strength players. Moreover, with the rising cost now, the negative news of Anta's products is undoubtedly a difficult problem.

1, the growth of the Greater China region is dazzling but fierce competition is hard to ignore.

According to Nike's latest earnings report, the Greater China region's revenue of 1 billion 847 million US dollars, compared with the North American region's 3 billion 982 million U.S. dollar revenue volume, there is still a big gap, but the growth rate of 27% is bright, becoming the fastest growing region of revenue. This is also an important reason why Nike attaches importance to China's region. However, there are still some uncertainties in this area. For the time being, irrespective of policy uncertainty, competition in the region is already in full swing.

Although the sports footwear market is still an incremental market in the Greater China region, sports brands have already split up. In addition to international Nike and Adidas, leading domestic brands have taken a firm foothold in the mass sports footwear market and some of the market segments. According to the data of Euromonitor in 2017, Nike and Adidas have an absolute market share in the Chinese market, and their market share combined to 40.9%. At present, Nike's "guarding war" and Adidas's "tough battle" have spread to the Chinese market. The war began to spread from line to line, and the two brands did not give in. In February 19th this year, Adidas launched a comprehensive cooperation with Tmall and started the new product. Nike made the same moves with Tmall last year. This also means that the two will soon launch a new round of traffic contention in China.

However, apart from the fierce competition from Adidas, the rise of domestic sports brands is also a competitive force that can not be ignored. From the perspective of market share, apart from Nike and Adidas, the domestic sports shoes brands also occupy a part of the market share, of which Anta share of 10.6% is ranked third. From the capital market perspective, Anta firmly occupied the first tier. And its crazed buy and buy policy has made it a global third, and the internationalization strategy is still advancing.

It is worth mentioning that Anta's interim results in 2019 showed that its FILA growth in the previous period rose by 79.9% compared with the same period last year, which led to an increase of 40.3% in the group's revenue and an increase of 27.7% in net profit over the same period. On the trend of share prices, Anta has also surged, and its market value has reached HK $197 billion 238 million.

In addition to Anta, Lining is also a new player. In recent years, with the "Gufeng wind" all the way, the mid-term performance report shows that its revenue grew by 33% over the same period last year, and its operating condition has been improving and its share price has been rising all the way.

In addition, XTEP and 31st degree also introduced new strategies in the field, and the performance in the first half of this year was good. With the rising tide of domestic goods, more and more consumers are concerned about domestic brands, which will undoubtedly face greater challenges and challenges for Nike.

2, in recent years, frequent product quality incidents "quality decline" questioned continuously.

In fact, we can see from the new quarter's earnings report that the North American region's revenue margin has declined. Revenues in North America in the first quarter of 2020 were US $4 billion 290 million, and new revenues showed us $3 billion 982 million in North America. The decline of chain ratio is not only affected by seasonal factors, but also, of course, the quality of products is a factor that can not be ignored. Product quality is a magic weapon for any enterprise to survive, especially in the media lighting industry.

In February 21st this year, a watched NCAA competition was held at Duke University against North Carolina University. Zeien Williams, a popular NBA champion in the competition, left the field only 33 seconds after his knee injury. The reason for the injury was that he slipped and slipped his shoes.

And the boots at its foot are not the other ones. It is the PG2.5 generation that Nike tailor made for Duke University. After the incident, the social media's crusade against Nike was also over the wave. Most of the spearheading points to Nike's frequent product quality incidents in recent years.

In fact, such incidents are not accidental. Previously, Nike shoes, including Aaron, Gordon, Ginobili, and NBA players, had been "disintegrated" on the spot. Earlier, Nike, as the sponsor of NBA's New Jersey sponsors, introduced many environmental friendly material jerseys. Nike so rich "tear history", we will feel that the quality of Nike products is problematic.

From the global market for running shoes, the Nike family accounted for 55%. The importance of footwear business is self-evident, and basketball shoes are the most dazzling pearl of Nike. If the quality of products is plagued again and again, in the long run, it will be extremely unfavorable for Nike's business development. Three.

In addition, on the black cat complaint platform, we can see many complaints about the quality of Nike products. Among them, some customers said that Nike shoes purchased in vip.com had worn out for more than a month. According to sina finance, there were 240 effective complaints against Nike in November, an increase of 133% over October, and the top ten of the black list.

Although Nike is the largest sporting goods company in the world, if we can not keep up with the times and ensure the quality of products, we can only start the "national fried shoes" by developing hunger marketing. In today's AI technology empowerment era, it will also make it more possible to be surpassed.

　 Tap the potential of Greater China

Digital drive is an important part of Nike's future strategy.

Through the new quarter's earnings report, we can see that the growth rate of 20% in the Greater China region has become the fastest growth in all regions of Nike. Although the competition in this area is particularly fierce, it is still an incremental market. On the other hand, in the long run, digital drive will be an important part of Nike's future development.

1, China's cooperation with e-commerce platform is going hand in hand.

From the perspective of the development potential of the Chinese market, the retail market of sports shoes and clothing in China has the characteristics of large volume and fast growth. According to the total retail sales in 2018, China has become the second largest sportswear and footwear retail market in the world after the United States, and it is also one of the fastest growing major markets in the world. And from the current "national fitness" craze and national attention to sports, the future sports shoes and clothing will further increase. According to the data, China's sports consumption market will reach 1 trillion and 500 billion yuan by 2020.

The sports business in the Chinese market has become a new growth point of sports consumption, data show that in 2018, the total consumption of Ali eleven sports reached 6 billion yuan, an increase of 17.6% over the same period last year. As early as Nike announced the 2019 annual earnings report, it said that Nike will focus on the development of e-commerce platform, which also caters to the current domestic market is the largest traffic entry. Despite the brutal growth of domestic electricity providers after the end of the traffic dividend, and gradually entered the industry standard period, but the Matthew effect intensified for Nike such a powerful brand, this will be a positive opportunity.

Today, Nike has reached an in-depth cooperation with Tmall and other head business platforms, in addition to saying that all Nike new products are facing the global simultaneous launch in Tmall, but also explore new retail outlets. Tmall's two intelligent stores have opened the first time, and Nike's 50 Direct stores have also launched the online delivery order for the double 11 this year.

To sum up, the Greater China region has great potential in the future, but the chance of Nike's dominance is not large. How to brand the brand and deal with its local brands to release its brand effect is still worth exploring Nike.

2, digitalization driven into the future key layout in the era of AI empowerment.

From Nike's retail business to the 2019 fiscal year of May 31, 2019, it accounts for about 32% of Nike's total revenue. 35% of its growth comes from digital channels, showing the importance of digital channels in their development.

Moreover, the impact of online economy on the real economy will continue, and online will be the focus of Nike's future layout. 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 this quarter, Nike executives say that the strategic and objective transformation of quality is highlighting its innovation and scale advantages.

Nike has launched the strategy of "consumer direct attack" more than two years ago, aiming to better serve consumers in a more personalized and large-scale way. Combined with its recent moves, Nike will focus on direct selling channels and invest huge sums of money in its digital retail channels, such as applications and online sales platforms. This can be seen from last month's cooperation with Amazon's one or two.

And why digital drive will become a key part of its future? In fact, when Nike disclosed its fourth quarter financial report in fiscal year 2019, it said that the main input module in this financial year is to improve data acquisition and analysis capabilities, and data for sports brand is also increasing. This is also a trend that will inevitably appear in the wave of mass consumption upgrading. Through the analysis of big data to produce products suitable for market demand, this will play an increasingly prominent role in brand operation, and personalized service industry will gradually become the competitiveness of the brand. Otherwise, there will be no domestic and foreign Internet giants competing to create a platform for this upsurge.

Of course, in the era of AI empowerment, the boundary of industry is blurred, and the track of sports brand is difficult to avoid overtaking. Take Andemar for example, as a rising star, the development is extremely fierce, once pressed Adidas to attack Nike directly, its accurate strategic marketing is worth Nike defense. Although the current momentum is less than before, such challenges will also exist in the future development of Nike.

To sum up, Nike's overall financial data in the new quarter are still good, and the growth momentum in the Greater China region is still good. At the same time, Nike is also developing new products in the female and child markets. Recently, Nike has launched a series of swimsuits for women with special needs. In the future, driven by digital strategy, if we can increase R & D efforts to ensure product quality, we will continue to release its market potential. However, in the sports and sports market, fierce competition will still exist for a long time. Although Nike is in the first place in the world, it is hard to ensure that the track pattern will not change in the era of constant pursuit of new and old competitors and the empowerment of AI technology.