Nike seeks Chinese revival

24 December 2012

BEIJING: Nike, the sportswear group, is attempting to further strengthen its brand, retail strategy and product portfolio in China, where new orders have recently been in decline.

The company registered growth across all of its core categories and national markets in the last quarter, except in China, where currency-neutral revenues fell by 12% and future orders registered a 7% contraction, after a 6% drop in the previous three months.

"There's a lot going on in this market: an evolving economy, an increasingly sophisticated consumer and a marketplace still challenged with some high inventory levels at retail," Charlie Denson, president of the Nike brand, told analysts. "We've seen a similar change in other markets, just never at this pace.

"We're committed to continuing to invest in the three key areas that will set the stage for growth: product, brand and distribution."

When discussing its brand, Nike pursues a "high end" positioning while remaining true to its goal of providing superior products for athletes, thus tapping the "need and aspirations" of customers in China.

"Anchoring our brand in authentic performance gives us the credibility and relevance to differentiate our products and brand from a sea of competitors," said Denson.

Turning to distribution, the firm is attempting to enter a "new phase" by emphasising greater productivity and profitability in its directly-owned and wholesale retail operations.

"We still expect to increase our square footage over time, but the retail footprint will evolve to bigger, better and more productive retail spaces," Denson said.

"We've mapped the key shopping districts and we're beginning to transform the distribution landscape, starting with the locations that matter most, generally the biggest urban centers and their most important shopping districts."

During the last quarter, Nike's direct-to-consumer retail arm saw 10% growth on a comparable store basis, while its wholesale partners reported the situation was strengthening markedly.

"In the product space, we're seeing improved sell-through in our apparel styles, with the new fit and silhouette that we've launched for the holiday 2012 season designed specifically for the Chinese consumer," Denson added.

Nike is also drawing on insights and know-how from 30 years of trading in China to return to growth. Denson said: "We know what needs to be done in China because we've successfully done it before."

Data sourced from Seeking Alpha; additional content by Warc staff