Nike Inc. shares decreased by more than 3% after the release of financial results on Thursday. The company which is famous around the world for its apparel reported fourth-quarter net income of $989 million or 62 cents a share. It means that during the same period of time last year, income was $1.14 billion or 69 cents a share. Major rivals of Nike Inc Adidas stocks fell by 1.7% after reaching the best result on Wednesday. Another competitor which us the Under Armour stocks rose by 0.9%. Nike’s revenue increased to $10.18 billion, from $9.79 billion in comparison with 2018. Revenues for Nike itself rose by 10% and in comparison with the same quarter last year and reached $9.7 billion. Converse sales accounted for $491 million.
There are several reasons why Nike Inc. was unable to meet the stock market expectations. The company’s strategy to increase the demand was to hire more celebrities. Another decision made by Nike was to expand its marketing activities significantly. The budget had to accommodate new challenges. The final result of all of these decisions is the 10% increase in company costs. It means that this number reached $12.7 billion in the past 12 months.
Let’s have a look at Nike products sold around the world. For example, in North America sales increased by 8% to $4.17 billion. At the same period of time, sales in China grew by 22% to $1.70 billion. Footwear is an important product for Nike, and hopefully, this part of the business is also increasing. Footwear sales increased by 9$% during the latest quarter. Apparel business grew by 6%, and the equipment sales increased by 7%.
Tariffs and protests in China
The trade war between the U.S and China will have a massive impact on Nike Inc. if sides are unable to come to an agreement. The G-20 summit is important as Trump’s threat to impose tariffs on sneakers and other products produced in China will negatively affect the American companies and Nike in particular. In 2018 26% of Nike’s footwear and 26% of apparel were manufactured in China. The problem for this company does end there as China is one of the largest markets for Nike. All of the reasons mentioned above makes Nike vulnerable to any further escalation between the countries.
The trade war is a significant issue for companies connected to the Chinese market. However, another problem which might damage Nike’s business and decrease the price of its stocks is the recent scandal. Nike worked together with the Japanese streetwear company Undercover, and the lead designer is Jun Takahashi. This designer voiced his support of Hong Kong protesters who are against the extradition law. As a result, Nike decided to stop selling the shoes which are connected to the brand Undercover.
Nike is a successful company which operates around the world. It is not surprising that investors and analysts are monitoring its performance on the stock market. The uproar around the shoes in China might have serious consequences. It depends on how well Nike and the Chinese government will solve this misunderstanding.