Forbes: Nike's China Sales a Growing Concern
By Daniel Joseph Cruz | April 16, 2014 10:15 PM EST
Nike has shown good performance in overall sales and continues to gain growth worldwide.
Forbes reported its stock price has increased by almost 10 percent in February. But even with this positive news, the popular sports brand still faces a tough challenge with its projected sales in China, one of the world's most important apparel markets.
Shoes are displayed in the Nike store in Santa Monica, California, in this file photo from September 25, 2013. Nike Inc on March 20, 2014 said that global Shoes are displayed in the Nike store in Santa Monica, California, in this file photo from September 25, 2013. Nike Inc on March 20, 2014 said that global orders for its merchandise soared heading into the World Cup soccer championship in Brazil this summer, sending shares up nearly 2 percent.
Sportswear in China has also seen an increase in popularity. Nike sees a marginable potential for its products to thrive in the country. But it has disappointed such views for the company, as its sales in most China cities (Hong Kong, Taiwan and Macau) plummeted in the past year.
Even though Nike's products sales are positively consistent worldwide with compounded annual rate of 30 percent, China and Japan display an opposite result, posting only a 4 percent growth in revenues.
"In 2012, Nike was so confident about China that it predicted sales would double to $4 billion in 4 years. The company's expectations of a compounded revenue growth of 18 percent in China have proven to be wildly overoptimistic," Forbes cited.
A report by Seeking Alpha also said Nike "has an ambitious global growth plan and presently in its third year of a five-year plan to increase sales by 40 percent to a total of $27 billion. It is also aiming to grow profit by 15 percent annually up to 2015."
Many factors contributed to the decline of Nike's product revenues over the past five consecutive quarters. Nike's basketball and running product lines, which are its frontrunner, have not been widely embraced by the targeted consumers in China.
The popularly perceived culture of putting more importance in academic education in Asian countries could be true, contributing to the nonreception of the residents toward sports as evidenced in its revenue reports.
Adding to the growing challenge faced by Nike in China are other sports brands to compete with. While Nike is dwelling and focusing more on the "sporty edge" in its products and not much on the fashion angle, competing brands like Adidas could gain an upperhand on this elusive market where Nike has long been chasing.
Adidas was seen to have adjusted its "sports image" that goes in line with the present young and hip generation. The "all-in" product campaign for men and women is now mostly seen in Adidas' retail stores. It's already catching up on China and other nearby Asian countries.
Nike, unfazed with the current hindrances for its sales goals for China, is still making efforts to widen its public reception in the area. The company was reported opening more stores in China's other cities recently.
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