Nike Lost The US Market Again

Facing the menacing

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In North America, the market is more serious than we think.

The US sports brand Nike group, which announced its downsizing last week, released its fourth quarter and full year results today. Although its revenue and profit growth exceeded Wall Street's expectations, Nike continued to fall behind the US market.

According to the latest data from Nike group (NYSE:NKE), its profit in the fourth quarter increased by 19% to 1 billion 10 million US dollars over the same period, exceeding analysts' expectations. Sales increased by 5% to 8 billion 630 million US dollars, the growth rate slowed down compared with the same period last year, and the growth rate was 6% in the same period last year.

Among them, Nike group's Converse performance increased by more than the core brand Nike, and Converse's sales increased by 10% to 554 million dollars, Nike

Sales increased by 7% to $8 billion 100 million.

In the 12 months to May 31st, the sales of Nike group increased by 6% to 34 billion 400 million US dollars in the Converse months, and the net profit rose 13% to 4 billion 200 million US dollars. The sales of Nike brand increased 8% to 32 billion 200 million US dollars, and the gross profit margin of the group dropped by 160 percentage points to 44.6% 44.6%. Some analysts pointed out that this meant that Nike had launched more discounts in the period to stimulate sales growth.

It is noteworthy that Converse sales rose by 6% to $2 billion, which was once marginalized, but now Converse has become the "secret weapon" of Nike group.

Obviously, the overall growth rate of Nike group is faster than that of Nike brand. The reason for this is Converse.

After Converse has been weakened by basketball advantages and sports attributes, Nike group has pformed it into a leisure fashion brand.

Relying on the brand advantage of over 100 years of history and classic canvas shoes, Converse soon set off an upsurge among young people.

With the increasingly clear positioning and strategy, Converse has been growing strongly in recent years. Its revenues in fiscal 2012 and fiscal year 2013 were $1 billion 324 million and $1 billion 449 million respectively. By 2014, its revenue increased to 1 billion 684 million US dollars. Now it has entered the 2 billion dollar club for the first time.

What's interesting is that according to a previous US data, these wealthy American people have passed the stage of showing off their wealth by luxury goods, more expensive fashion brands, and an earlier article on sports shoes worn by Silicon Valley CEO. About 80 dollars of Converse is the favorite of Cook, Bezos and Zuckerberg.

Converse was bought by Nike group for $305 million in July 2003.

The revenue created by Converse for Nike group has nearly doubled nearly 7 times on the basis of the purchase price.

At present, Converse continues to compete fiercely in the niche market with the VANS of Viagra group.

Analysts say that in the longer term, Nike group may invest more resources in Converse.

The picture shows Nike's fourth quarter and main performance data for the year.

The picture shows the main performance data of Nike in the fourth quarter and the whole year.

By category:

The shoe department is still the core of Nike group, with sales increased by 6% to US $21 billion 80 million, accounting for 61.3% of total sales.

Sales in clothing department also increased by 6% to 9 billion 654 million US dollars.

Sports equipment sales fell by 5% to 1 billion 425 million dollars.

By Region:

As the main market of Nike, sales in North America increased by 3% to 15 billion 216 million dollars compared with the previous fiscal year, and sales of footwear category increased by 4% to 9 billion 680 million dollars.

Sales in Western Europe increased by 6% to 6 billion 210 million US dollars; sales in central and Eastern Europe increased by 4% to US $1 billion 487 million.

Sales in the Greater China region recorded a significant increase of 12% to $3 billion 785 million, while footwear sales increased by 12% to $2 billion 920 million.

Sales growth in Japan was strongest, rising 17% to $1 billion 14 million, and shoe sales increased by 17% to $667 million.

Sales in other emerging regions increased by 8% to $3 billion 990 million, while shoe sales increased 11% to 2 billion 816 million dollars.

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It is noteworthy that in the past year, the retail sales of Nike brands rose by 16% to $9 billion 82 million compared with the same period last year, while wholesale channel sales increased by 2% to 23 billion 80 million US dollars over the same period, accounting for 72% of the total Nike brand revenue.

According to the data, the sales performance of the Nike brand in the wholesale channel is the best. The sales increased by 14% to 8 billion 580 million US dollars, and the performance of sports equipment, running shoes and Jordan Brand also maintained a growth trend.

Sales of Nike's trump shoes, basketball sports shoes, however, recorded a 6% decline to $1 billion 290 million. After selling golf for business, the Department's sales fell by 18% to 579 million dollars, while the football category also recorded a negative growth.

Since 2016, Nike's growth has begun to slow down.

Some analysts pointed out that although Nike's performance exceeded analysts' expectations, it did not make much sense. After all, Nike's performance growth is slowing down year by year, and its growth has lagged behind its competitors' Adidas sales of 20%.

Mark Parker, chief executive of Nike group, also concedes that the Adidas is an important threat to Nike in the North American market at present. But he assured investors that the North American market is expected to resume profitability in the second half of fiscal 2018 after the launch of the new product.

According to the world clothing and shoe net, excluding the exchange rate factor, Adidas's global sales increased by 18% in 2016, and its net profit exceeded 1 billion euros, setting a new historical record.

Among them, sales in the Greater China region increased by 28%, becoming the fastest growing market in Adidas.

Facing the menacing Adidas, Nike's situation is more serious than imagined.

According to the latest statistics from YAHOO financial, Adidas's share in the American sports shoes market increased from 6.3% in May to 11.3% in May 2017, while Nike's market share decreased from 35.9% last year to 34.7%.

It can be seen that the gradual recovery of Adidas is nibbling the share of Nike's most important US market.

Even if Nike's fourth quarter performance exceeded analysts' expectations, it should not be taken lightly. After all, Adidas increased its market share by only 6% in one year.

The picture shows Nike, Jordan Brand and adidas5 month share data of American sports shoes.

In April, Adidas's share of the American sports shoes market recorded a record 13%, exceeding Jordan Brand for the first time.

The data also showed that the number of sports shoes sales in Nike had a single digit decline in May, while sales of Under Armour dropped by 19%, while Adidas sales surged by 74%.

When Addias's three classic sports shoes are becoming more and more popular, Nike's sports shoes are slowly cooling down, and Under Armour, which has no fashion, is also in a weak position.

It is noteworthy that the sports brand competition in the US market is very intense. Recently, CEO Kevin Plank, a Under Armour's performance obsessed recently, revealed in an interview this week that he sends a card to Mark Parker every year, which reads, "one day you will know our name."

For this behavior, Kevin Plank explains that although Under Armour has never been on the list of Nike competitors, Nike has always been the target of Under Armour catching up.

Up to now, Mark Parker has not responded to the news.

After the release of the earnings report, Mark Parker officially announced its entry into the Amazon platform to better handle the brand's unsalable inventory and discount products.

At present, Nike has chosen to enter Tmall mall in Alibaba in China. In Europe, it chose Germany's largest e-commerce platform Zalando, plus brand self run official website. Nike's total electricity business annual sales volume has reached 2 billion US dollars.

If Nike can sell directly on Amazon, the annual sales volume is expected to increase by 300 million to 500 million US dollars, making the competition for sports goods more intense, Goldman Sachs analysts said.

According to Bloomberg data, consumers purchase 55% of their links from Amazon when searching for products.

At present, Amazon has taken 34% of the US Internet retail market share, and the analysis predicts that its market share will expand to 50% by 2021.

However, in the Nike and Amazon cooperation, Amazon needs to develop more stringent anti counterfeit measures and control the number of similar dealers on the website. Nike hopes to improve the experience of Amazon Nike consumers, and will continuously evaluate the role of Amazon platform.

To better integrate into social media, Nike also plans to sell products directly through Instagram.

In addition to the power business market, Nike has recently adjusted its group structure, and will reduce its workforce by 2% to about 1400. The regional structure has been reduced from the original 6 to 4 sectors, namely, North America, Europe, Middle East and Africa (EMEA), Greater China, and Asia Pacific and Latin America (APLA). Each division has only one vice president to reduce the number of vice presidents.

In addition, Nike plans to stimulate profitability of the group by streamlining products and shortening the production cycle. Nike will reduce its footwear style by 25%, focusing on ZoomX, Air VaporMax and Nike React. With the help of technological innovation such as intelligent production and 3D printing, the production cycle of Nike is expected to be shortened from 4 months to 18 months.

According to Morgan Stanley, the production cost can be saved up to 10%.

Nike President Trevor Edwards said that in today's highly competitive market environment, Nike as a leader in the industry must become faster and more flexible. After adjustment, the operation efficiency of the group will be greatly improved. He also said that through restructuring plan, the competitiveness of Nike in the digital market will be greatly improved, and the delivery time in the main market will further accelerate, "the future of sports products will be in the hands of consumers".

After the release of the earnings report, Nike's share price rose 7.6% to $57.2 a share yesterday. The cumulative decline of nearly 10% in the past three months is now about $88 billion 650 million.

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