Nike Greater China Sales Double Digit Growth For 19 Consecutive Quarters

The high expectations of the market, Beijing time on March 22nd, Nike group released the 2019 quarter of fiscal third quarter earnings.

In the three months ended February 28th, global revenue grew 7% to $9 billion 610 million over the same period, which is basically consistent with analysts' expectations. This is the first time that Nike has not exceeded its expected revenue for the first 6 quarters.

Net profit of $1 billion 100 million, or 68 cents per share, is 3 cents higher than analysts expect.

Affected by the US tax reform, Nike lost $921 million in the same period last year.

Since 2019, Nike's stock price has risen by about 18.7%, and its total market capitalization is about $138 billion 500 million.

Following the high of $87.99 in March 4th, Nike's stock price hit a record high of $88.59 in March 19th.

However, after the release of the earnings report, Nike's share price fell nearly 4%. The industry believes that the main reason is that North American local sales failed to meet market expectations.

As Nike's largest market, sales in North America increased 7% to $3 billion 810 million in the third quarter.

Previously, the market expects sales in this region to grow by 10% to 3 billion 850 million dollars.

The Greater China market is still Nike's fastest growing region in the world, with sales growth of 19% to 1 billion 590 million dollars during the period, excluding the exchange rate effect, which has increased by 24%.

In the first two quarters of fiscal year 2019, the revenue growth in Greater China was 20% and 26% respectively.

At present, Nike has achieved double-digit sales growth in the Greater China region for nineteenth consecutive quarters.

In addition, sales in Europe, the Middle East and Africa increased by 6% to 2 billion 435 million US dollars, while Asia Pacific and Latin America achieved 3% growth and sales reached US $1 billion 307 million.

Andy Campion, chief financial officer of Nike, said in a public statement that "all four regional markets have achieved significant growth driven by the Chinese market and the direct consumer plan". (Andy Campion)

During the period, gross margin rose from 44.7% in the same period last year to 45.1%.

Gross profit margin increased by 70 basis points to 44% in the first two quarters.

The reduction of discount and the increase of DTC business profit margin offset the rising cost of products and unfavorable factors of exchange rate to a certain extent.

Nike expects gross margin growth to be roughly the same as the 70 base points achieved in the first half of this year.

From the perspective of the major brands, the sales of Nike's main brand increased by 8% over the same period last year.

However, following the 7% and 6% increase in the first two quarters, CONVERSE brand also suffered a 4% decline in sales.

By the end of 2018, Nike group had announced that former Coca-Cola executive Scott Ursel (Scott Uzzell) succeeded David Grasso Davide Grasso, becoming the new president and CEO of CONVERSE brand.

Judging from the category, Nike brand footwear and clothing sales have achieved single digit sales growth.

In search of more room for growth, the company said it plans to invest more in clothing and women's products in the future.

In the third quarter, Nike officially released the Yoga dress series, which was seen as a positive competition with Lululemon in the female market.

The new series is under the training category of Nike Training. Besides the Female Yoga dress, the brand also specializes in the male exclusive yoga clothing products.

Analysts expect the total revenue of Nike group to grow by 8% to $39 billion 300 million in the 2019 fiscal year ended May 31, 2019, compared with an average increase of 4.2% in the whole industry over the same period.

In mid March, Adidas released its fourth quarter results in fiscal year 2018, revenue grew 5% to 5 billion 234 million euros, and growth in the Greater China region slowed by 13%.

Annual revenue grew by 8% to 21 billion 900 million euros, and net profit increased 20% to 1 billion 700 million euros.

At the same time, the German brand issued a financial warning, which was dragged down by the shortage of supply chain. In the first half of 2019, the supply of mid-range clothing was limited.

The North American market was the most affected, with growth expected to stagnate in the first half, with sales ranging from 200 million to 400 million euros.

The shortage of Adidas supply chain will indirectly boost Nike's already strong North American market position.

It is worth noting that, two days before the earnings announcement, Ahmer Inam, a senior director of Nike's data analysis department, filed a lawsuit against his old family, claiming that he was racially discriminated and led to many kinds of physical and mental illness. Inam,

According to the Portland business daily, Ahmad Inam from India said his promotion was snatched by a less experienced white man.

He claims that a fairly white worker is 75 thousand dollars higher than he is, and that colored employees are regarded as "two class citizens".

This is the fourth discrimination allegation faced by Nike after its internal personnel management crisis.

At the same time, the big business still needs to clean up a lot of "mess".

Author: Luo Yingying