Nike China has experienced a significant growth during 2nd quarter of FY15

Nike Inc reported second-quarter earnings for fiscal year 2015 (FY15) earlier this month. The company outperformed analysts’ earnings expectations but the retailer’s performance in China is worth mentioning.

Nike was able to record a 21% year-over-year (YoY) growth in the “Greater China” geographical segment. This growth figure is calculated on a currency-neutral base. The retailer raised its guidance for the growth estimate for FY15 to mid-teens from the earlier guidance of low-mid teens. Second-quarter growth is better than the last three quarters. The growth in each of the last three quarters starting from the latest was 20%, 2%, and 7%, respectively.

Nike China’s performance was relatively poor compared to the overall company in the preceding three quarters. The segment which accounted for 10% of the company’s totalrevenue in third quarter of FY14 reported a decline in its share in the two subsequent quarters, falling to 8.5% in the first quarter of FY15. The share has now increased to 10.3% for this quarter, with revenue coming in at $758 million.

The management reported that the growth is driven by the increase in comparable store sales (comps) for the wholesale partners. This according to the management has flown from the overall performance of the brand globally. Nike reported a 14.8% YoY growth in total revenue during the quarter.

The other factors that have particularly led to the growth include higher focus on retail productivity and the improvement in customer experience, driven by the reorganization of the points of distributions. The inventory status for Nike in China is comparatively better than in most of the other parts of the world.

JPMorgan Chase & Co. issued a report on Nike’s performance in China, following its quarterly earnings report. The company made a comparison of Nike with other sports apparel sellers.

The first brand JPMorgan used for analysis was Anta. The firm believes that Anta does not justify its current valuation. It mentioned that the investors have failed to take into account a number of risks that the company faces in valuing the stock. These risks include excess inventory levels and the risk related to exposure to fashion trends through its stake in Fila. JPMorgan assigned Anta stock a Neutral rating.

Originally published on: BIDNESS ETC, How Nike Inc may get support from Chinese segment