Interview Synopsis

Nike in China - 2022 Performance Outlook

  • Public Equity
  • Consumer
  • Greater China

In 2019, Nike’s revenue in China grew nearly four times faster than the group as a whole. CEO Mark Parker described its performance as a “blueprint” for the rest of the company, and expressed his expectation that Nike would continue to grow in China “for years to come”.* But after years of double-digit growth, Nike’s business in China appears to have “peaked”, according to a former senior executive at the company.

Nike could miss out on double-digit growth in China for the first time since 2019

In an interview with Third Bridge Forum, the specialist said “great challenges” caused by the COVID-19 pandemic, the Xinjiang cotton boycott incident, supply chain issues and the decline of Nike’s product competencies will likely see it miss out on double-digit growth in China for the first time in three years.  

We were told that Nike now also faces stiff competition from Chinese sports brands like Li-Ning and Warrior, which have profited from the rise of “China chic” as a popular fashion trend. The specialist said Nike’s discounts have increased from 10-11% to 15% to attract more customers who now compare prices on multiple channels. 

Despite these challenges, Nike continues to be a “leading player” in China, having created a strong brand culture linked to its basketball gear and Air Jordan series, according to the specialist. It is also in a better position than other international sportswear brands like Puma, Converse and Adidas – the latter of which faces channel structure and inventory management challenges, we were told.  

We heard leisure products generate over 50% of Nike’s total business revenue in China and that any “boost” to this segment would increase the overall growth of Nike. The specialist also broke down the contribution of Nike’s basketball gear, Air Jordan series and childrenswear range to the company’s business revenue. 

Meanwhile, the specialist said Nike continues to focus on online marketing. We were told Nike’s online business includes a directly operated online store, as well as online stores on public traffic platforms like Chinese TikTok Douyin and private traffic platforms. The specialist does not expect Nike to “extensively” expand its directly operated stores. Instead, they said it will focus on upgrading the 5,000-6,000 retail stores it already has, but could potentially open new flagship stores in Shenzhen and Chengdu. 

Despite the aforementioned headwinds, the specialist said Nike could still achieve a “higher median growth rate” in the Greater China region. They also said the growth of international athletic and outdoor brands in China such as The North Face and New Balance shows that international sports brands like Nike can still “grow and gain” market share in the country. 

Click here to access all the human insights in Third Bridge Forum’s “Nike in China – 2022 Performance Outlook” Interview.

* FT

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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