Recently, 361 Degrees (01361) "officially announced" the signing of American professional basketball star Nikola Jokic as the company's global brand spokesperson, which has attracted widespread attention in the sports circle. However, while Jokic's fans were on a budget and looking forward to the release of Jokic's "boots", the sports giant on the other side of the ocean, Nike (NKEUS) is quite "frustrated".
Zhitong Financial APP learned that Jokic was a signed star under Nike. Earlier this year, Nike also announced the termination of the contract of another American professional basketball star, Kyrie Irving, who immediately switched to Anta Sports (02020). It is interesting to note that when Jokic signed 361 degrees, Nike's stock price also played a "high diving" drama. On December 22, Beijing time, Nike's stock price opened sharply lower, falling more than 12% intraday, and the previous trend came to an abrupt end.
Source: Futubull.
Revenue growth is under pressure and full-year guidance is lowered
As the world's leading sports brand, it is difficult for Nike to shake its foundation because of a star's "change of door", but if the company's performance growth prospects are weak, investors will "vote with their feet".
Zhitong Financial APP learned that on December 22, Nike released its results for the second quarter of fiscal year 2024 as of November 30, 2023. According to the financial report, the company achieved revenue of about 133 in the second quarterUS$8.8 billion, a year-on-year increase of 05%；The net profit attributable to the parent company is about 15$7.8 billion, an increase of 1856%。In addition, the company's gross sales margin reached 44 in the second quarter due to product pricing**, the return to normal freight rates and the company's careful control of sales discounts6%, a year-on-year increase of 17 percentage points.
In terms of operating efficiency, the company's inventory amount was 79 at the end of the second quarter$7.9 billion, up from $9.3 billion in the year-ago quarter$2.6 billion, down 14 per cent;The number of days of inventory turnover at the end of the period decreased by 24 days year-on-year to 101 days.
According to the observation of Zhitong Financial App, although Nike's operating fundamentals remain resilient as a whole, the company's growth performance on the sales side is uneven. In terms of brands, the Nike brand achieved revenue of 128 in the second quarter700 million US dollars, a year-on-year increase of 12%, and the revenue of the Converse brand decreased by 11 year-on-year4 to 5$200 million.
Geographically, the company's revenue in North America and EMEA decreased by 3% year-over-yearRevenue in Greater China increased 8% year-over-yearAsia Pacific & Latin America (APLA) revenue increased 7% year-over-year. According to the Guoxin** research report, Nike's second quarter in North America and Asia-Pacific Latin America was better than Bloomberg's consensus estimates, while Europe, the Middle East and Africa (EMEA) and Greater China were lower than Bloomberg's consensus expectations.
It can be seen that Nike's performance growth is more dependent on markets outside North America, and the sustainability of this growth pattern will be tested in the short term. Zhitong Financial APP learned that Nike lowered its full-year revenue growth to 1%, lower than the previous mid-single-digit growth guidance. According to Guoxin** Research Report, Nike's downward revision of guidance is mainly due to the increase in macro pressures, especially in Greater China and EMEA. Compared to the end of the previous quarter, lifecycle management of key products, as well as a stronger U.S. dollar, negatively impacted revenue in the second half of the year. At the same time, the disruption of the ** chain and the accelerated clearance of the previous year caused an adverse impact of about 400 basis points.
It is worth noting that Nike also proposed in its earnings report a plan to cut costs by about $2 billion over the next three years. The company plans to simplify its product portfolio, increase automation and use of technology, streamline the overall organization, and leverage its scale to "increase efficiency." The company plans to reinvest the savings from these initiatives into driving future growth, accelerating innovation and improving long-term profitability.
Matthew Friend, Nike's chief financial officer, said in a statement: "As we look ahead to a softer revenue outlook for the second half of the year, we remain focused on strong gross margin execution and disciplined cost management. "The plan will cost Nike 400 million to 4$500 million in pre-tax restructuring charges, which will be substantially realized in the company's quarter. Nike said those expenses were primarily related to employee severance pay.
Fight in the Greater China market
Nike pays so much attention to "throttling", and it is not difficult to understand that the company let Jokic go, after all, there is a rumor in the basketball world that "centers don't sell shoes since ancient times". However, it should be noted that these high-quality idols "flow" to the Chinese sports brand market to help Chinese competitors achieve upward growth in brand power, which is not necessarily what Nike wants to see.
Euromonitor data shows that the global sports shoes and apparel market size will reach 3717 in 2022$300 million. According to the GF** research report, the retail sales of China's sports shoes and apparel industry will reach 3626 in 2022800 million yuan, with a compound annual growth rate of 117%, much higher than the overall footwear and apparel industry in China in the same period 28% compound annual growth rate.
At present, domestic outdoor sports are still in the early stage of development, the penetration rate is far lower than the level of developed countries, and the potential market size is huge. According to the "Outdoor Sports Industry Plan (2022-2025)" jointly issued by the General Administration of Sports of China and the National Development and Reform Commission, the number of outdoor sports participants in China will reach 400 million in 2021The penetration rate of China's outdoor sports market is about 28%, which is still far behind the penetration rate of more than 50% in developed countries.
A large and well-structured market inevitably contains many opportunities. From the perspective of changes in industry demand, the consumption of sports shoes and clothing shows the "four modernizations" trend of consumer stratification, scene segmentation, functional specialization, and personalization. New scenarios and new track opportunities are emerging, and outdoor, children's, women's and other markets are growing rapidly.
In this process, consumers' perception of sportswear brands tends to mature. In the past ten years, the leading sports footwear and apparel brands in the Chinese market have shown a strong "siphon effect", and the market share of the industry's CR5 has increased from 44 in 20115% to 57 in 20221%。The market share of domestic sports brands increased from 24 in 20136% to 38 in 20223%。
According to Guoxin** Research Report, during the Double 11 in 2023, Chinese brands occupy three of the top 5 sports brands on Tmall, namely FILA, Anta, and Li Ning. In this context, when Nike fights a "defensive war", it will inevitably provide an opportunity for China's leading sports brands to fight an "offensive war".
Taking ANTA Sports as an example, in October 2023, it released its development plan for the next three years (2024-2026). The Group is committed to maintaining double-digit growth in the next three yearsThe FILA brand will achieve the goal of 400-50 billion turnover;The Descente brand and KOLON Sports will strive to build the group's third 10 billion brand.
Nike's fierce battle in the Greater China market is destined to be difficult, and the company has withdrawn its fist in order to fight more forcefully, or it is not known whether it will decline, but someone in the capital market has already cast "votes".