On December 20 local time, Nike (NYSE: NKE) announced the results of the second quarter of fiscal year 2022. The group reported a total revenue of US $11.4 billion, an increase of 1% over the same period last year. It is noteworthy that the revenue in China decreased by 20% year-on-year and the profit decreased by 36% year-on-year.
The day after the results were announced, Nike shares opened at $166.69, the highest intraday price of $171.19, and finally closed at $166.63, up 6.15% from the previous day. On the 22nd, the company’s share price opened high and closed at $165.44. Previously, on November 5, the highest intraday price of the company’s stock reached US $178.78, a new high since the company was listed.
revenue in China decreased by 20%
According to the financial data disclosed by Nike, the group achieved a total revenue of US $11.4 billion in the second quarter of fiscal year 2022 as of November 30, 2021, an increase of 1% over the same period of the previous year. Nike’s brand revenue was $10.8 billion, the same as that of the same period last year. Influenced by European and North American channels, converse brand revenue was US $557 million, an increase of 16% in terms of currency neutrality.
“Our second quarter results reflect our deep consumer connections, the continued strength of our brand and strong market demand.” Matt friend, executive vice president and chief financial officer of Nike, said, “as we address short-term supply challenges, we focus on implementing our consumer direct acceleration strategy to drive our long-term financial prospects.”
In terms of specific business regions, Nike’s North American market achieved a revenue of US $4.477 billion in the second quarter, a year-on-year increase of 12%; The European, Middle East and African markets realized a revenue of US $3.142 billion, a year-on-year increase of 6%; The Asia Pacific region and Latin American market achieved a total revenue of US $1.347 billion, a year-on-year decrease of 8%.
It is worth noting that, contrary to other major sales markets, Nike group’s revenue and profit in China fell significantly in the second quarter. Among them, the revenue was USD 1.844 billion, a year-on-year decrease of 20%; Pre tax profit was USD 569 million, a year-on-year decrease of 36%. Nike said that the decline in revenue in China was mainly due to the closure of relevant factories caused by covid-19 epidemic, which further led to the decline of available inventory level.
sales expenses increased by 15%
Cheng Weixiong, an expert in textile and clothing brand management and general manager of Shanghai Liangqi Brand Management Co., Ltd., believes that the decline in the performance of international sports brands such as Nike and ADI in China is not only affected by the epidemic, but also due to the rise of the national tide. In addition, the proportion of self operated stores and overweight online business of international brands is very small, while domestic brands have overweight online business under the impact of the epidemic in recent two years, and the performance increment has made up for the loss caused by the shrinkage of offline entity income.
Under the pressure of performance growth, the competition of international head sports brands is also intensifying. On the 16th of this month, several media reported that Nike sued its old rival adidas for infringing six patented technologies, and Nike also asked the U.S. International Trade Commission to prevent the import of a variety of Adidas sports shoes.
According to Shen Meng, director of Xiangsong capital, the technology patent dispute between Nike and Adi is essentially a competition for consumers.
Nike’s financial data also showed that the group’s sales and management expenses increased by 15% year-on-year in the second quarter, far exceeding the increase of 1% of revenue. Specifically, the group’s demand creation cost in the second quarter was US $1 billion, a year-on-year increase of 40%, mainly for digital marketing; Operation and management expenses were US $2.7 billion, with a year-on-year increase of 8%, mainly due to the increase of strategic technology investment and salary related expenses.
local brands need to increase R & D investment
In China’s sports goods market, local sports brands such as Li Ning, FILA, Anta and Tebu began to share the market share of Nike and Adidas.
According to a series of research reports on the rise of domestic products released in October this year, the sales of local brands such as Li Ning and Anta have increased significantly since the Xinjiang cotton incident in March this year. In April, the sales of Li Ning, FILA and Anta tmall’s official flagship stores increased by 72%, 54% and 51% respectively year-on-year, while the sales of Nike and Adidas decreased by – 59% and – 76% year-on-year.
In Cheng Weixiong’s view, under the influence of Guochao wind and Xinjiang cotton incident, local sports brands have been further sunk and consolidated, especially with the support of online business in recent two years, further opening up their advantages in basic mass products. However, once Nike, Adie and other international brands increase their online business, it will still have an impact on the sinking market and popular products.
Cheng Weixiong also believes that the era of emphasizing marketing over R & D has passed, and Chinese sports brands need to accelerate and increase investment in product R & D. “no matter how big a breakthrough in the field of sports fashion, sports leisure and other clothing is, it is only ‘popular’, and the research breakthrough in footwear and sports materials is more ‘sustainable and long-term’.”
(China Finance)
