Nike reported resilient quarterly sales in 2019 on the back of strong sales in China, however, a lower than expected growth in North America, its biggest market, is a source of concern for the American footwear and sport accessories maker.
In its 2020 financial results for its second quarter ended November 30, 2019, the world’s largest sneaker maker’s revenue surged 10percent to $10.3 billion in the second quarter, up 10percent on a reported basis, up 13percent on a currency-neutral basis. Revenues for Converse were $480 million, up 15percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and Europe, as well as through digital globally.
Nike’s revenue from North America rose 5.3percent to $3.98 billion in the second quarter, compared with the previous year’s 9percent rise.
However, in China, the fastest-growing market for Nike, revenue rose 20percent to $1.85 billion. The company recently introduced its app in the country, which outgoing Chief Executive Officer Mark Parker said on Thursday was downloaded 1 million times.
Revenue from Europe, Middle East & Africa increased 10percent to $2.5 billion the second largest revenue after North America market.
Inventory rose 15percent to $6.2bn, an all-time high. Nike said the jump was a result of strong global demand, as well as a higher rate of on-time deliveries from factories.
Intense competition in the market
The Oregon-based footwear has continued to face intense competition from brands such as Adidas, Skechers, and VF Corp’s Vans in North America, even as it pushes to sell exclusive merchandise through its tap-and-buy SNKRS app and retail stores.
In a bid to ramp up sales, Nike collaborated with celebrities with increased marketing around major sporting events.
In November, the company ended a two-year-old partnership with Amazon to sell Nike’s merchandise directly on the online retailer’s website, to focus more on sneaker launches on its own digital platforms.
Industry watchers remain optimistic about Nike’s digital transformation, specifically its push to sell more products directly to consumers, without a retail middleman. In 2019, Nike Direct sales grew twice as fast as its wholesale business and now account for about 32percent of all sales. It is expected that the number would continue to grow.
OLUFIKAYO OWOEYE
