The Decline Of Sales In China Is A Wake-Up Call For Nike

Analysts pointed out on Friday that for Nike (NKE), the decline of its sales in China has sounded an alarm bell.

For Nike, the Chinese market has recently become the company's "special child", and also its biggest headache. Although many western brands are salivating over the huge Chinese market, the Chinese market is not very important for the profitability of these companies. But for Nike, the situation is different. Mark Parker, CEO of Nike, said in his interpretation of the company's latest quarterly financial report that "the two stories of the company are still China and North America".

Although Nike's share and growth momentum in the North American market are growing (this growth mainly comes from Nike's Jordan basketball shoes And FlyKnit seamless running shoes), but the company's sales in the Chinese market fell in the last quarter. In fact, in the past fiscal year, Nike's sales in almost all markets excluding exchange rate changes increased, even in Western Europe, but only in China.

Parker said: "The race in the Chinese market is a marathon, not a sprint." He pointed out that Nike was frustrated in the Chinese market because the overall growth rate of the Chinese economy has slowed down. In addition, Nike is also under pressure from excess inventory and price reduction pressure from competitors.

At the same time, Nike is also facing trouble in making its products suitable for Chinese consumers. In contrast, Nike's biggest competitor, Adidas (ADS), has launched a full range of products that can resonate with Chinese shoppers. Nike's sales in the Chinese market have declined, while Adidas' sales have increased, which means that Nike's market share is being occupied by Adidas. Some analysts pointed out that Adidas from Germany may replace Nike as the leader in the Chinese market.

Christopher Svezia, an analyst at Susquehanna Financial Group, pointed out in an interview: "This has sounded an alarm bell for Nike." He said that the taste of Chinese consumers "is getting higher and higher, and it is no longer 'give me what I want'."

Nike's sales from the Chinese market is about 2.5 billion dollars, accounting for 10% of the company's total sales. In contrast, Nike's total sales in North America last year exceeded $10 billion. However, Sivia estimates that Nike's EBIT from the Chinese market accounts for up to a quarter of the company's total EBIT, which means that for Nike, the profitability of the Chinese market is higher than that of the North American market.

Sivia pointed out that "China is an extremely important market for Nike, and its profitability is extremely high." In order to increase the demand for its products in the Chinese market, NBA superstars Lebron James and Kevin Durant, who have signed endorsement contracts with Nike, will visit China this summer.