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Nike, which lost nearly US$800 million in three months, achieved double growth in Greater China with these tricks!



First Textile Network News on June 26 (Reported by Reporter Martin ): The impact of the epidemic on sports brand Nike is further intensifying. Today (June 26), Nike released its fourth quarter results for fisca…

First Textile Network News on June 26 (Reported by Reporter Martin ): The impact of the epidemic on sports brand Nike is further intensifying.

Today (June 26), Nike released its fourth quarter results for fiscal year 2020 (the period is from March to May). The reporting period coincided with the peak of the epidemic in Europe and the United States, and Nike achieved operating income 37.403 billion US dollars, a year-on-year decrease of 4%. In the fourth fiscal quarter of fiscal year 2020 as of the end of May, Nike’s operating income reached US$6.313 billion, lower than the expected US$7.38 billion, a year-on-year decrease of 38.14%, and a quarterly net loss of US$790 million, which was also lower than market expectations. Net profit in the same period last year to US$990 million.

As for the decline in fiscal year performance, Nike explained that during the epidemic, a large number of offline stores were closed, and product shipments from wholesale customers dropped by nearly 50%, which was the main factor for Nike’s decline in performance. .

It is not difficult to review Nike’s financial report and find that in the first three quarters of 2020, Nike achieved revenue of US$31.09 billion, a year-on-year increase of 7%; it achieved net profit of US$3.329 billion, a year-on-year increase of 10%. Taking into account the impact of the epidemic, the performance exceeded market expectations. Operating income in the third quarter was US$10.1 billion, a year-on-year increase of 5%; net profit was US$847 million, a year-on-year decrease of 23%. The performance changes in the third quarter were mainly affected by the decline in sales in Greater China under the new coronavirus epidemic environment.

In the same period, Nike’s revenue and net profit in Greater China both increased. In addition, excluding the impact of exchange rates, Nike’s operating income in the Greater China market reached 1.647 billion U.S. dollars, a year-on-year increase of 1%. Nike The only region in the world to achieve sales growth. Nike admitted that due to the epidemic, most Nike self-operated and dealer stores in North America, EMEA (Europe, the Middle East and Africa), and APLA (Asia Pacific and Latin America) were closed, which partially offset the growth trend in Greater China.

First Textile Network reporter learned here that over the past ten years, Nike has maintained a leading position in China’s sports industry. The company’s market share increased from 14.5% in 2009 to 22.9% in 2018. The brand market shares of its main brands NIKE, Converse and Air Jordan in China in 2019 were 19.5%, 2.1% and 1.8% respectively.

At the same time, Greater China is also Nike’s fastest-growing important market. In fiscal year 2019, Nike’s revenue in Greater China reached US$6.208 billion, a year-on-year increase of 20.9%, and as of In the first quarter of fiscal year 2019, the company’s revenue in Greater China achieved double-digit growth for 21 consecutive quarters. Greater China’s revenue contribution also increased from 10.6% in 2010 to 16.7%.

Open Source Securities analyst Lu Ming said that looking at Nike’s Greater China region alone, revenue in the first three quarters of fiscal year 2020 was US$5.032 billion, a year-on-year increase of 12%, of which three The operating income achieved in the quarter was US$1.506 billion, a year-on-year decrease of 4%, accounting for 15.66%. The decrease in revenue was mainly due to the significant impact of the COVID-19 epidemic on the Greater China region. First, on the basis of a neutral exchange rate, the revenue of the Greater China region was in It fell 4% after 22 consecutive quarters of double-digit growth. Second, in the first two months of the third quarter, revenue in Greater China increased by double digits, offsetting the impact of the epidemic in late January. Third, the epidemic in February During the peak period, about 75% of Nike’s self-operated and partner stores in Greater China closed their stores, and the remaining stores reduced their business hours. Fourth, as of late March, the store opening rate in Greater China was close to 80%, and the opening rate in key cities was even higher.

Lu Ming believes that under the epidemic, Nike’s main resilience is reflected in:

1. Nike’s liquidity and ability to obtain funds It is an important guarantee. For Nike, liquidity is not an issue during the challenging pandemic. Financially resilient, the company has a long history of maintaining a high-quality balance sheet, excellent investment-grade credit ratings, adequate access to capital, and strong operating cash flow.

2. Nike has established strong partnerships throughout the industry’s value chain. These include TopSports, PouSheng and Tmall in China, as well as Footlocker, Dick’s, JD and Zalando in the US and Europe. At the same time, we have established long-term partnerships with many manufacturers that last for decades. During the special period of the epidemic, long-term partners in all aspects of the “production-sales” industry chain focus on long-term interests and respond together.

3. Nike started to implement digital transformation strategy earlier and laid out an online sales system. This move was forward-looking, which allowed the company to respond quickly and more effectively when the global epidemic spread. Reduce the negative impact of offline store closures.

First Textile Network reporter also learned that during the epidemic, Nike closed more than half of its offline stores in China, which had a negative impact on the company’s performance. Nike has improved its performance through a number of measures. To weaken the impact of the epidemic, firstly, we will continue to promote investment in R&D and creative design, continue to focus on technological research and development and aesthetic creative design of sportswear, and strive to create products that are loved by consumers; secondly, we will continue to launch joint brands to enhance brand influence. : Nike continues to launch co-branded shoes, including increasing cooperation with sports stars for sports shoes, and increasing cooperation with fashion brands or fashion celebrities for trendy shoes, thereby attracting a wider consumer group; third, O2O omni-channel development, Nike Launch Nike APP in China, create a one-stop membership center, and create a seamless online and offline experience; fourth is precision.��Internal business: Sell the unprofitable surfing sports brand Hurley, reduce investment and increase overall profits.

It is reported that, except for Greater China, the epidemic is in the spread of the outbreak. Nike will follow the Chinese model. On the one hand, it will close stores in a timely manner to ensure the safety of employees and consumers. On the other hand, Use various Nike-related apps to maintain online communication and interaction with consumers, and at the same time maintain consumers’ love for Nike through Nike’s four core advantages: brand advantage, digital advantage, product innovation and excellent team.

Lu Ming further pointed out that Nike’s Greater China region continues to perform well in its regional business. Rapid growth, high-quality profits and healthy market conditions reflect the height of the Chinese sports market. prosperity. In the process of achieving the goal of being close to consumers and continuously carrying out digital reforms, Greater China is the best case. At present, Nike has basically completed the laying of a digital direct retail framework in Greater China, including the NIKE Tmall flagship store, Official WeChat mini program, NIKE.COM, SNKRSApp and NIKEApp.

Liang Xize, a researcher at Haitong Securities, predicts that after this round of epidemic is over, sportswear consumption may pick up quickly. This is because: the epidemic has objectively increased the public’s emphasis on health. People will be more actively involved in sports activities; under the current economic level, healthy lifestyles will be paid attention to by more people, and consumers will also be able to afford fitness expenses. As domestic clothing consumption gradually recovers, public awareness of sports and health will increase. The demand for sportswear is expected to bottom out and rebound.

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