Nike’s China Problem

on March 21 2014 | in Daily Headlines Trending | by | with No Comments

The share price of Nike was up 1.5% following the announcement of quarterly results by the U.S. sportswear and footwear retailer, Foot Locker. A strong performance by Foot Locker over the quarter demonstrates Nike’s strength, as nearly two-thirds of the shoes sold at the retailer are Nike’s. The latter’s stock price has gone up by nearly 10% over the past month, as it continues to record strong growth despite problems in emerging markets. However, the sportswear giant is still struggling in one of the world’s most important apparel markets – China.

Sportswear has been increasingly popular in China, driven by a booming economy and rising disposable incomes. Over the last seven years, the market has grown at a compounded annual rate of nearly 30%. Yet Nike’s sales in Greater China (i.e., including Hong Kong, Macau and Taiwan) fell for five consecutive quarters, before recording a paltry growth of 4% in the second quarter of Fiscal 2014. Over this period, revenues for Nike brand products rose everywhere except China and Japan.

In 2012, Nike was so confident about China that it predicted sales would double to $4 billion in four years. The company’s expectations of a compounded revenue growth of 18% in China have proven to be wildly over-optimistic. Sales in China fell for five straight quarters before this slump was arrested in the Q2 FY’14, in which Nike posted a 4% growth.

Read more at Forbes.

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