Nike's president and CEO John Donahoe has defended the brand's business in China after facing boycott calls from consumers in the market in March this year. During a recent earnings call for the fourth quarter of its 2021 financial year, Donahoe said it has been in China for over 40 years and invested "significant time and energy" in the market during its early days. "Today, we are the largest sports brand there and we are a brand of China and for China," he added.
Responding to a question about Nike's market share in China, Donahoe said its biggest asset it has in China is consumer equity. He explained that Chinese consumers feel a deep connection to the NIKE, Jordan and Converse brands and that it has a strong consumer franchise in the market. "They feel very connected to our brand. And so we're going to continue to invest," he added.
Earlier this year, Nike, adidas and H&M were among the brands that caused a stir in China after past statements of the brands taking a stand against Xinjiang-sourced cotton surfaced. Multiple media outlets including Reuters and ABC News, said Nike and adidas both said previously that they do not source products or yarn from the Xinjiang region. Meanwhile, H&M reportedly said in a 2020 statement that it was "deeply concerned" about reports surrounding accusations of forced labour in Xinjiang and that it did not source products from the region.
The online furore came after the European Union, UK, Canada and the US criticised China. Chinese netizens on Weibo then called for international brands to "get out" of the market and for "smearing Xinjiang cotton", ABC News said. Singer Wang Yibo also reportedly terminated his relationship with Nike.
Nonetheless, Nike remains undaunted. Donahoe said during the earnings call that its long-term investment in China will carry on through the express lane, which was launched in 2017 to create, update and fulfil products quickly in response to consumer demand. This initiative allows Nike to have local product insights. At the same time, it is also opening a new digital technology centre in Shenzhen. To date, Donahoe said Nike has over 7,000 monobrand stores in China and it has been the top sports brand in TMall for a decade. In May, the company added a million new members on TMall through the 6.18 shopping festival.
Its fourth quarter revenue for Greater China grew 9% on a currency neutral basis. For the full year, EVP and CFO, Matthew Friend, said Greater China posted its seventh consecutive year of double-digit growth. Following a strong quarter in March, Nike's business in the region was impacted in April and it suspended marketing activities and product launches. In May, the business witnessed a recovery trend improving to a single-digit decline.
"We have an experienced local team in Greater China who helped create our operational playbook at the beginning of the pandemic. They have proactively managed marketplace supply and demand in order to navigate through these dynamics. And we expect inventory to be normalised by the end of the second quarter," Friend added.
Meanwhile, revenue for Asia Pacific and Latin America jumped 76% on a currency neutral basis with growth across territories led by Japan, SOKO and Mexico. Korea grew double-digits during the quarter and NIKE Digital grew more than 50%. According to Friend, this was enabled and amplified by its efforts in doubling down on memberships via its Member Days.
Aside from the growth in Asia Pacific and Latin America as well as Greater China, Nike also said its selling, general and administrative expenses increased by 17% compared to the same period last year due to higher levels of brand activity connect to the return of spot. This increase was a result of digital marketing to drive demand, technology investments to support Nike's digital transformation and higher wage-related expenses.
Photo courtesy: 123RF
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