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Nike China's income fell or was overtaken by Li Ning
Nike Greater China encompasses three key markets: Mainland China, Hong Kong, and Taiwan. According to Nike's latest financial report, the region generated a total revenue of $820 million during the six months from June to November this year. A senior executive from a domestic sports goods company told CBN that it is anticipated that Nike’s sales in the mainland market will drop from around 10 billion yuan in previous years to between 7 billion and 8 billion yuan. Meanwhile, Li Ning’s revenue for the first half of the year has surpassed 4 billion yuan, raising the possibility that it could overtake Nike as the top brand in the Chinese market.
Can Nike break out of its current "quagmire"? Despite recent efforts, the company’s performance in the Chinese market has yet to recover from a period of year-on-year declines. The latest quarterly report shows that Nike Greater China’s revenue fell by 3% in the period from September to November this year, falling behind Li Ning (02331.HK) in terms of growth.
In the quarterly report released on December 17, Nike reported revenue of $404 million for the period ending November 30, representing a 3% year-on-year decline. Footwear revenue stood at $210 million, down 1% compared to the same period last year, while apparel revenue dropped to $170 million, a 7% decrease. Sports equipment revenue was $25 million, down 2% year-on-year. At the same time, rising sales and administrative expenses have squeezed profit margins, leading to a 7% year-on-year decline in EBIT (Earnings Before Interest and Taxes), which totaled $126 million.
However, the rate of decline has improved compared to the previous quarter. From June to August this year, Nike Greater China recorded revenue of $416 million, a 16% drop year-on-year. This quarter, the decline narrowed to just 3%, indicating some signs of stabilization. Looking at order trends, the outlook for Nike in Greater China appears to be improving. Orders in the region are expected to grow by 4% year-on-year from December 2009 to April 2010, while orders were still down 6% year-on-year during the June to August period.
With these shifts in performance, Nike is under pressure to regain its competitive edge in one of the world’s most dynamic and challenging markets. As local brands like Li Ning continue to gain ground, the battle for dominance in China’s sports goods sector is intensifying.