"$150B Surge: Can US Giant Turn the Tide?"

After several consecutive quarters of declining operating income, Nike recently announced a new quarterly report showing a 6% increase in operating income in the Greater China region.

After the news spread, Nike's stock price in the US stock market opened up and rose, reaching a maximum of 15%. Although the increase slightly narrowed at the end of the day, the stock price still rose by 12.18%, and the closing price remained almost the same in the following two days.

At present, Nike's total market value has risen to $181.9 billion. Just overnight after the news was announced, the market value increased by 150 billion yuan.

This data proves that the Chinese market has once again become the key.

01, Stock price rebound

In the previous three quarters, Nike's operating income in the Greater China region has been continuously declining, for which Nike has also been constantly thinking of various methods to restore growth in the Chinese market.

For example, in September this year, a new retail concept store was opened in Shanghai, and more new formats will be launched in the future to provide young consumers with a fresh sense of fashion.

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In addition, Nike also hopes to continue to do a good job in public relations to dilute the impact of the Xinjiang cotton incident.

However, Nike cannot be sure that it has ushered in spring at present, because there are still many problems in the recent financial report.

Although the operating income increased by 17% in this quarter, the profit did not increase, indicating that the company's profit margin is continuously declining. Moreover, the profit margin in the first two quarters of the 2023 fiscal year has decreased by 12.8% compared with the previous fiscal year.In terms of stock prices, although the current price has risen from a low of $80 to $116, it is still down by 34% compared to the previous high of $176. Therefore, the current rise can only be called a rebound and may not necessarily lead to a factual reversal.

02, More Effort is Needed

On the other hand, Nike's revenue in Greater China increased by 6% year-on-year, which is not yet convincing enough to be considered a reversal of the trend. After all, there have been several quarters of decline, and a small increase on a relatively low base is not yet persuasive.

Nike's sales volume in Greater China has been declining in the past few quarters, with a 16% decrease in the first fiscal quarter of 2023, and a 7% to 20% decrease in operating income in the last three quarters of the 2022 fiscal year.

The decline in sales volume is just a phenomenon, we also need to pay attention to the reasons behind it.

Undoubtedly, the adverse impact of Xinjiang cotton has not yet dissipated.

At that time, Nike claimed that it would never use Xinjiang cotton and also required business partners to stop using Xinjiang cotton, which led to a spontaneous boycott of Nike products by Chinese consumers.

On the other hand, Nike has been transferring its production line to Vietnam many years ago, withdrawing from the Chinese market. Although it has obtained lower labor costs, Nike's manufacturing quality seems to have deteriorated a lot.

From time to time, consumers post screenshots and personal experiences on the internet to prove the quality problems that occurred after purchasing some of Nike's products.03, The Chinese Market is Key

On the other hand, Chinese sports brands are also growing continuously.

From the past of being an OEM for foreign giants to gradually forming their own brands, there will be no problem in manufacturing processes. They only need to work hard on product design and brand packaging, which naturally puts huge pressure on these foreign giants.

Regardless of how Nike's trend will be in the future, it is just another new case for many foreign giants to learn from, that focusing on the Chinese market can lead to better performance.