NIKE: Business is booming in China

NBA basketball player LeBron James of Miami attends a promotional event in Shanghai.Reuters/Aly Song

• Nike‘s leadership is bullish on China and said partnerships with the country’s leading digital platforms are driving momentum.
• The sneaker giant posted second-quarter revenue of $1.38 billion for the Greater China region, the 17 consecutive quarter of double-digit sales growth.
• Nike’s quarterly beat on both the top and bottom lines, but it sales in China fell a bit short of estimates.
• Watch Nike trade in real time here.

Nike says its relationship with Chinese consumers is “as strong as it can possibly be.”

On Tuesday’s second-quarter conference call, Nike CFO Andrew Campion told investors, “We’ve now delivered 17 consecutive quarters of double-digit revenue growth in Greater China,” adding that the growth was “fueled by Sportswear, Jordan, Basketball, and across women’s and young athletes.”

The sneaker giant posted revenue of $1.38 billion for the Greater China region, 70% of which come from footwear sales. Sales in China were up 20% on a currency-neutral basis, well above the 6% revenue growth in North America. Meanwhile, China’s profit before some items jumped 27% to $502 million. 

“Our fundamentals in China are actually quite sound and strong,” Campion said, “We’re not seeing any push back from consumers. On the contrary, our relationship and connection to consumers is as strong as it can possibly be.”

Campion added that Nike is driving growth through partnerships with China’s leading digital platforms like Tmall and WeChat. Tmall is one of the flagship retail platforms operated by Chinese e-commerce giant Alibaba, while WeChat is a multi-purpose social-media and mobile-payment app developed by Chinese tech giant Tencent.

“This quarter, we made it possible to combine NikePlus member accounts to Tmall accounts,” Compton said.

“We’re seeing an impressive increase in new members in China as a result. And last week, we launched a partnership with WeChat, making 1 billion monthly active users just one click away from becoming a NikePlus member.”

Following Tuesday’s closing bell, the sneaker giant posted second-quarter results that beat on both the top and bottom lines, but shares slid more than 4% as gross margins disappointed. Sales in China and Latin America missed also missed Wall Street estimates.