Understanding Sports Brand And Deepening China'S Market Profitability

Following Adidas's annual performance, Nike, the world's largest sports product company, released its third quarter 2011/2012 report in Beijing on March 23rd.

Despite the slowdown in the Chinese market, the two sporting goods giants still produce brilliant results.

By contrast, deep domestic market.

Nike's performance exceeded expectations

The report shows that Nike's net profit for the current period was 560 million US dollars, up 7% from 523 million US dollars in the same period last year.

According to a Bloomberg survey, 19 analysts surveyed expect Nike's earnings per share in the third quarter to be $1.17.

In the past 23 quarters, Nike's earnings performance exceeded analysts' expectations in 22 quarters.

Nike said in its earnings report,

In addition to Nike, Adidas also announced its 2011 Annual Performance soon. Last year, its revenue was 13 billion 344 million euros, excluding exchange rate factors, an increase of 13% over the same period last year. The profit per share grew 18%, a record high.

Although the performance exceeded expectations last year, the weakness of the Chinese market has made these foreign sporting goods giants ready for psychological preparation.

Adidas is expected to increase its 2012 revenue by only 5%~9% over the same period of 2012, due to a slowdown in the growth of China's market.

Lining's trouble

For China's local brands, performance has always been ahead of domestic sporting goods in the past year.

Anta annual report shows that turnover increased by 20.2% to 8 billion 900 million yuan, gross profit increased by 18.7%, and shareholders' profits increased by 11.5% to 1 billion 730 million yuan.

But it is far from the rapid growth a few years ago.

Shoes and clothing industry commentator Ma Gang has told reporters that in the past 10 years, Lining, Anta and other enterprises average annual growth of about two digits of 30%.

Lining, who once occupied the head of the domestic sports brand for many years, has not only escaped the influence of the domestic market, but also expected to decline in the offensive against foreign brands.

In a recent performance notice, Lining said that the annual interest rate of equity holders in 2011 was expected to fall by about 7~8 percentage points from 11.7% in 2010.

In addition to the weak growth of orders and the impact of inventory, the cost and the increase of expenditure are also important reasons for the drag on profits.

Under the influence of the new wholesale discount policy and the rising cost of production, the gross profit margin of the company is expected to decrease by about 1~1.5 percentage points from 47.3% in 2010.

The overall cost rate (including distribution costs and administrative expenses) for investment in brands, products and human resources is expected to increase by about 7~8 percentage points from 33% in 2010.

The industry has blamed Lining's declining performance for its poor internal pformation.

Following the resignation of Li Ning Co executives, by the beginning of this year, Lining accepted the investment of TPG and GIC totaling 750 million yuan for the company's development, and then announced to Li Ning Co that the organizational restructuring, streamlining personnel, improving operational efficiency and reducing personnel costs would be the first clue.

In the face of this internal and external attack, Lining said in his earnings report that it will continue to promote channel pformation and strengthen the two to four line.

However, the sinking of the channel is not just Lining. Nike's action seems to be faster. The international brand is already in the two or three tier cities of China.

As early as August 2010, Nike launched 300 yuan low price shoes, which is 25% lower than the current price.

By contrast, Lining's brand influence and price advantage are even more bleak.

It is gratifying to note that Lining's first quarter 2012 order data show that the number of orders has reversed three consecutive quarters of downward trend, achieved a positive growth, of which footwear products orders increased faster than clothing products.