Nike'S Report Card Is Not Very Good, Online Sale AJ Life?

This article is from the WeChat public twenty-first Century Business Review (ID:weixin21cbr), the original title: "Nike's report card is not very good, online sale AJ life." reporter: He Ji faction.

The impact of the global epidemic makes sports consumer goods giants unable to stay aloof.

Beijing time on March 25th, Nike released a new quarter earnings report, as of the end of February 2020, Nike's global revenue grew 5.1% to 10 billion 100 million U.S. dollars over the same period, but net profit fell 23% to 847 million U.S. dollars. At the same time, gross profit margin also dropped 0.8 percentage points year-on-year.

For this industry tycoon with strong barriers to competition, the new transcript is not very good compared to previous years of steady growth, even though revenues still exceed $9 billion 500 million expected by the market.

Greater China has always been the leader in Nike's global market growth, but this time, the double-digit growth record for 21 consecutive quarters was terminated due to the outbreak, bringing the market's revenue down by 4% (excluding exchange rate factors).

"We are at an unprecedented moment, and we must examine the rapidly changing external environment every day, so as to clarify how to deal with it." In the earnings call conference, Nike group president and CEO John Donahoe John said so.

　 The new Commander takes over the online business.

The times have changed, and the first place must be prepared for danger.

In October 2019, Nike announced the replacement of Mark Parker Parker (Mark Parker) as the company's CEO for 13 years. John Donaho, the former eBay CEO, took the lead in January 2020.

In Parke's tenure, Nike's income doubled, and its market value went out of a curve of 10 times increase over the past 10 years. Most consumer company were prone to increase profits without increasing profits, while Nike realized a sharp increase in net profit through a series of measures such as raising prices.

From the market value, income scale and other dimensions, Nike all ranks first in the global sports brand. But in recent years, the market competition of new and old rivals is becoming more and more intense. Both Adidas and Anta are catching up, and there are also Lululemon, Under Armour and other rapidly rising tiger teachers.

Nike urgently needs to explore new growth space, further widen the gap with its competitors, which makes its management change somewhat hasty. After several months of research, the new head is set.

In the 1 months when the new CEO takeover took place, the management team changed again. In mid February this year, Nike appointed three senior executives at the same time, including the president of the marketing department, COO and CFO. Among them, incumbent CFO Andy Campion (Andy Campion) will be the group COO in April 1st, responsible for Nike's global technology and digital transformation business.

Strengthening the digital business is the most important logic in the change of Nike management. In addition to the noteworthy background of the new CEO business, last June, Nike set up a new executive position, the global chief digital information officer, leading the group in the global information technology function and digital business development, which is a strong signal for Nike to develop a new digital battlefield.

The continuous increase in the number of digital businesses has made the growth of the performance prominent. The new quarterly report shows that digital sales increased by 36% over the same period last year, extending the double-digit growth trend in the first two quarters.

In the Greater China region, sales of digital channels also maintained a growth rate of over 30%, to a certain extent, offset the negative impact of the closing of the physical stores and the shortening of business hours in the region.

Pressure development, sale and inventory

As an engine to drive global revenue growth, sales in Greater China have had a profound impact on Nike.

In January, Donaho first visited China, Japan and other countries in his first week as a CEO. At that time, the new crown outbreak has not yet erupted. He expects to know first-hand information about brand sales such as Nike, Jordan and CONVERSE in these key markets.

In the new quarter's earnings call, the key words of "Greater China / China" were mentioned 35 times, which is enough to see the importance of high level.

Nike said in its earnings report that in the first two months of the three quarter, the Greater China region's revenues continued to maintain double-digit growth, but the epidemic was offset by the end of January.

At the peak of the domestic epidemic in February, Nike closed about 75% of the physical stores in the Greater China region, and the stores that did not shut down also shortened business hours.

At present, nearly 80% of the stores in the Greater China region have resumed normal business operations, and the recovery of major cities is better. Meanwhile, online platforms are also pouring into more traffic. Last week, Nike resumed its first physical store in Wuhan.

Just the night before the release of the earnings report, Donaho communicated with the Greater China team to understand the positive attitude of Chinese consumers. Donaho said, "I am really impressed by the fact that I am not exaggerating."

It is hard to see that Nike has seen hope in the recovery of Greater China, but the global spread of the epidemic has brought Nike into a new crisis. In addition to greater China, Japan and South Korea, all self operated stores in other parts of the world began to close in March 16th.

The heavily affected North American market is now the main source of revenue for Nike, contributing nearly 40% of its total revenue. The Chinese market can get through the difficulties of online sales, but the impact of closing stores on the performance is not optimistic. The situation reversed 1 months ago. Donaho said, "the strain and innovation of the Chinese team can provide a reference for other parts of the world (fight against the epidemic)." This "anti epidemic guidelines" has been implemented in Japan and South Korea.

Based on China's relevant experience, Nike summed up the three stages of business recovery: first, the store reopened, then the supply and demand of the product returned to normal, and finally, the sales resumed strong growth.

Looking ahead, Nike said it is still "optimistic" and expects Greater China's next quarter revenue may be unchanged from last year's Q4. As of the third quarter, Nike has a total cash and short-term investment of about $3 billion 200 million, in a difficult market environment, cash flow is fairly healthy.

But even so, it is necessary to tighten your belt. Nike said it will implement "strict cost management" and "global supply optimization".

When the passenger flow is stagnant, going out of stock becomes the biggest pressure of the group. In the current quarter, Nike's inventory was $5 billion 810 million, which was lower than that of the last quarter of US $6 billion 200 million. However, factors such as the overheating of the epidemic and the postponing of the Olympic Games will further raise the problem of backlog.

Tiger securities analysis said, Nike's warehouse will backlog from the three quarter of 2019 since the winter inventory, in the electricity supplier channel, there are many early AJ style price promotions, the future fans or will usher in the "AJ sale".