Due to the epidemic’s severe impact on the physical retail industry, Nike’s global revenue fell 38% year-on-year to 6.3 billion in the fourth fiscal quarter (January to March 2020) USD, less than expected. After the results were released, Nike’s stock price fell all the way overnight (June 26) after opening, closing down 7.59% at $93.70.
Suffering from the epidemic
Nike physical store operations are dismal
On June 26, Nike released financial report data for fiscal year 2020 (April 2019 to March 2020), 2020 Fiscal year revenue was US$37.403 billion, a year-on-year decrease of 4%. Revenue in the fourth quarter of fiscal year 2020 was US$6.313 billion, lower than the expected US$7.38 billion, and a single-quarter loss of US$790 million (more than 5 billion yuan), or 51 cents per share, was far worse than the gains in the same period last year. Profit was $989 million, or 62 cents per share.
As for the decline in performance, Nike said that during the epidemic, a large number of offline stores were closed, and product shipments from wholesale customers dropped by nearly 50%, which were the main factors for the decline in the company’s performance. Data in Nike’s financial report shows that due to the epidemic, most Nike self-operated and dealer stores in North America, Europe, the Middle East and Africa, Asia Pacific and Latin America were closed.
Full-year sales in North America, Europe, the Middle East and Africa fell by 1% year-on-year, with North America falling by 9% and Asia-Pacific and Latin America rising slightly by 1%. Affected by the epidemic, in the fourth quarter, product gross profit margin dropped 820 basis points year-on-year to 37.3%. The company said factors for the decline in gross profit margin include rising product and supply chain costs and increased inventory levels.
Previously on March 19, the American investment bank Cowen predicted in a report that due to the new crown pneumonia epidemic, which has led to the closure of a large number of stores around the world and the complete shutdown of leagues such as the NBA, Nike Group will be unable to sell its products as of May this year. Fourth-quarter sales at the end of the month will be down about 34%, with a loss of about $3.5 billion.
As of the end of 2019, Nike has more than 750 stores around the world, including 384 retail stores in the United States. However, as the epidemic situation improves, as of June 25, about 90% of Nike stores around the world have resumed business, and retail traffic continues to improve. Among them, in North America, about 85% of Nike stores have reopened, but most still choose to shorten their business hours. In addition, about 90% of stores in Europe, Africa and the Middle East have reopened, and almost all stores in Greater China have returned to business.
As of the end of May this year, Nike Group had a total of US$12.5 billion in cash, cash equivalents and short-term investments, an increase of US$4.1 billion compared with the same period last year.
As for the operating situation in the new fiscal year, Nike said that due to the uncertainty caused by the epidemic to the market outlook, it will not provide future performance guidance for the time being, but it expects inventory levels to increase in fiscal 2021. It returned to good shape in the second quarter.
Nike performed well in Greater China
Strongly promote online digital sales
With the global market being hit by the epidemic, Nike Greater China’s revenue and net profit increased in fiscal year 2020. Excluding the impact of exchange rates, Nike’s Greater China market revenue increased 1% year-on-year to US$1.647 billion in the fourth fiscal quarter, making it the only region in the world where the group has achieved sales growth. Full-year revenue reached US$6.679 billion, a year-on-year increase of 11% on a constant exchange rate basis, achieving double-digit growth for six consecutive years; profit before interest and tax reached US$2.490 billion, a year-on-year increase of 5%.
It is worth noting that Nike tried to make up for offline losses through online sales. During the reporting period, online sales surged 75%, but this part accounted for only 30% of the overall revenue. Most Sluggish sales at brick-and-mortar stores dragged down results.
Nike is planning to transfer the inventory accumulated during the epidemic to digital channels for promotion. Nike specifically mentioned, “In Greater China, this approach has worked.”
In fiscal year 2020, Nike’s digital business grew by 49% year-on-year, with all regions showing double-digit growth ; In the fourth quarter of fiscal year 2020, digital business revenue increased by 79% year-on-year, accounting for approximately 30% of total revenue.
Matt Friend, executive vice president and chief financial officer of Nike, said, “The accelerated development of digital technology not only reflects the short-term challenges faced by physical retail, but also reflects the strategic shift in new markets in the future. A signal.” According to the company’s earlier goal, it will achieve a digital sales ratio of 30% by fiscal year 2023.
Jordan earned $180 million from Nike in one year?
Nike was founded in 1962. As a rising star, after its establishment, Nike gradually widened the gap with Adidas by relying on product technology innovation and top star promotion, and became the world’s No. 1 sportswear brand. A major brand, it accelerated its acquisitions from 2002 to 2007. In 2008, it refocused on its main brand Nike, and its three sub-brands Jordan Brand, Converse and Hurley aimed at segmenting and differentiated markets.
Looking at the brand situation, Nike’s main brand revenue for fiscal year 2020 was US$35.5 billion, and Converse’s revenue was US$1.8 billion. In terms of categories, the Jordan brand performed well. The Jordan brand’s annual sales increased by 16%, the sports lifestyle series Sportswear increased slightly by 1%, the Nike basketball series NIKE Basketball fell by 4%, and the running, training and football categories fell by more than 10%.
According to NBA reports, although Nike’s sales have been significantly affected by the epidemic,However, Jordan Brand’s sales have bucked the trend, and this is thanks to Jordan’s documentary “The Last Dance.”
It is reported that the sales volume of the Jordan brand increased by more than 50% in fiscal year 2020, with revenue approaching US$1 billion, in which female consumers played an important role.
In the past year, Jordan Brand’s wholesale sales reached US$3.6 billion, and retail sales reached US$7 billion. This does not include Jordan Brand sales in the second-hand market.
NBA business reporter Darren Rowell pointed out on Twitter that if the terms of Jordan’s contract with Nike are as previously speculated, that is, 5% of Jordan Brand wholesale sales, then Jordan Revenue from Nike reached $180 million in the past year.
Investment banks maintain Nike rating
U.S. stocks have fluctuated significantly this year, but Nike’s stock price, as a consumer leader, has It is very resilient, with an overall decline of 6% in 2020. In March this year, Nike’s stock price fell sharply along with the U.S. stock market, but now its stock price has returned to pre-epidemic levels, up two-thirds from its lowest point in March. At present, the investment bank’s rating on Nike has not changed. JP Morgan maintains Nike’s overweight rating and the latest target price is $104.00. Morgan Stanley maintains an Overweight rating on Nike and its latest target price is $119.00. UBS maintains a buy rating on Nike and its latest target price is $127.00. Credit Suisse maintains Nike’s outperform rating and its latest target price of $111.00.
In the past thirty years, Nike’s PE valuation center has been basically 10-30 times. After successfully overtaking Reebok in the local market in the 1980s, its market value increased. In the 1990s, it reached the top of global sports, marking a breakthrough period in market value and valuation. From 1998 to 2003, valuations remained low due to the Asian financial crisis and supply chain upgrades. In 2004, demand in Asia picked up, and the company entered another critical period of growth. In 2008, valuations bottomed out during the financial crisis. Valuations recovered after 2010 and ushered in a strong rise until 2015. Since 2017, valuations have risen to more than 30 times, and current valuations are at historically high levels.
The performance of many international apparel brands is dismal
Except for Nike, the performance of most internationally renowned apparel brands has also been revealed. Adidas’ operating profit in the first quarter of 2020 fell 93% to 65 million euros; sales fell 19% to 4.753 billion euros (approximately US$5.32 billion). The COVID-19 epidemic has caused the closure of a large number of the company’s stores (including brand-operated stores and franchised stores), and the traffic of other stores has also been significantly reduced, which has had a corresponding negative impact on Adidas’ revenue. The company’s net income from global continuing operations fell 97% to 20 million euros, compared with 631 million euros in the same period in 2019.
German sports shoes and apparel company PUMA’s first-quarter results were slightly higher than expected. In the first quarter, Puma’s sales fell 1.3% to 1.3 billion euros (approximately 1.4 billion U.S. dollars) after currency adjustments; operating profit fell 50% to 71.2 million euros. Among them, sales in the Asia-Pacific region fell by 12%, but sales in Europe, the Middle East and Africa still increased by 3.5%, and sales in the Americas increased by 3.1%.
SKECHERS’ sales in the first quarter of 2020 were US$1.242 billion, compared with US$1.277 billion in the same period last year. Net profit for the quarter was US$49.1 million, compared with US$109 million in the same period last year.
H&M Group’s first fiscal quarter net sales increased by 8% to 54.948 billion Swedish kronor (approximately US$5.5 billion), compared with 51.015 billion Swedish kronor in the same period last year. Pre-tax profit more than doubled to SEK 2.5 billion from SEK 1.04 billion in the same period last year.
Uniqlo’s parent company’s revenue in the first half of fiscal year 2020 (August 2019-February 2020) was 1,208.5 billion yen (approximately US$11.1 billion), compared with 1,267.6 billion yen in the same period last year Yuan. Net profit for the current period was 100.4 billion yen, compared with 114 billion yen in the same period last year.
Zara’s parent company’s sales in the first quarter of fiscal year 2020 fell to 3.303 billion euros (about 3.7 billion U.S. dollars), compared with 5.927 billion euros in the same period last year. Net loss in the quarter was 409 million euros, compared with net profit of 734 million euros in the same period last year.
GAP’s sales in the first quarter of fiscal year 2020 were US$2.107 billion, a year-on-year decrease of 43%. Net loss in the first quarter was US$932 million, compared with net profit of US$227 million in the same period last year.
Victoria’s Secret parent company’s net sales in the first quarter of fiscal year 2020 were US$1.654 billion, compared with US$2.629 billion in the same period last year. Net loss in the quarter was US$297 million, compared with net profit of US$40.26 million in the same period last year.
Levis’ first fiscal quarter net revenue was US$1.506 billion, compared with US$1.435 billion in the same period last year. Net profit for the quarter was US$153 million, compared with US$147 million in the same period last year.
Lee’s parent company’s net revenue in the first quarter of 2020 was US$504 million, compared with US$648 million in the same period last year. Net loss in the quarter was US$2.71 million, compared with US$15.41 million in the same period last year.
Guess’s net sales in the first quarter of fiscal year 2020 were US$260 million, compared with US$537 million in the same period last year. Net loss in the quarter was US$158 million, compared with US$21.37 million in the same period last year.
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