Original title: behind Nike Inc's layoffs and Puma's huge losses: the net profit of Chinese dealers has dropped by 90%, and the discount cannot be stopped. Source: Tencent News
Recently, Baosheng International, the main distributor of international sports giants Nike Inc, Adidas and Puma in China, released a forecast for the first half of 2020, compared with a net consolidated profit of 463 million for the same period last year. This year's comprehensive net profit was only 17 million, a sharp decline of more than 90%.
Baosheng International has earlier announced that most of its retail stores in China have been suspended to avoid the epidemic and protect employees from infection, given that the company's operating income mainly comes from sporting goods sales in physical retail stores. The epidemic is expected to have a significant negative impact on the company's operating revenue and performance in the first half of this year.
It was supposed to be the 2020 of the sports year, and it was seen by many sports brands as a new engine to continue strong performance. However, under the influence of the epidemic, the "Sports New year" has been "diverted".
According to the previous incomplete statistics, from the beginning of 2020 to the end of March, more than 40 large-scale international sports events have been postponed or cancelled, coupled with the long-term closure of offline stores, brand exposure and flow dividends have plummeted, and the revenue of major sports brands has fallen into the norm in the industry.
Nike Inc reported a total loss of $790 million (5.5 billion yuan) in the first quarter of 2020. Nike Inc then announced a restructuring of senior leaders and plans for a large number of layoffs, the exact number of which has not been disclosed, but the cost of one-time pre-tax dismissal is expected to reach $2 million to $250 million.
As the leader of global sports brands, Nike Inc's dismal performance once again sounded the alarm to the market. After the release of the results, Nike Inc's market value fell by 12 billion US dollars. Even a giant like Nike Inc faces such difficulties that life for other brand retailers will be even more difficult.
Yes, it is. Puma, the German sportswear brand, lost nearly 100 million euros (820 million yuan) in the second quarter of 2019, while Anderma lost as much as $590 million (4.1 billion yuan) in the first quarter.
The sharp decline in the performance of major brands has also led to a dismal situation for upstream contract manufacturers and downstream retailers.
As a subsidiary of sneaker maker Yue Yuen, Baosheng International is one of the largest retail partners of Nike Inc and Adidas in China.
Since late January this year, a large number of Chinese stores of the two sporting goods giants have closed one after another. Nike Inc Group revealed that at its worst, only 25% of domestic stores opened to welcome customers, while Adidas Group revealed that it had cancelled all wholesale orders in February and planned to digest inventory through self-operated discount stores this year. In February, the worst decline in the first quarter, revenue plunged 82.3 per cent to 308 million yuan, a loss of about 1.5 billion compared with the same period last year.
In contrast, its parent company, Yue Yuen Group, which is also the main contract manufacturer of Nike Inc and Adidas sneakers, recorded a loss of about $60 million to $70 million (unaudited) in the first quarter of 2020, down 180 per cent from the same period last year.
Under the influence of the epidemic, the major brands are accelerating their transformation. Despite the rapid growth of ecommerce data, there is still uncertainty about the performance of sports brands in the second half of the year, while the overseas epidemic has not abated, while the Chinese market, which has resumed positive economic growth, has become a lifesaver.
Take Nike Inc as an example, there are four major regions in the world: North America, EMEA (Europe, Middle East and Africa), APLA (Asia-Pacific and Latin America) and Greater China. From March to May, revenue in the first three regions fell sharply by 39%, but revenue in Greater China increased year-on-year. Even under the influence of the epidemic, revenue in Greater China rose 11% year-on-year to about 47.2 billion yuan in fiscal year 2019, which is roughly equivalent to the revenue of Li Ning Co. Ltd. and Anta, two major local companies combined.
"in the past few months, we have overcome unprecedented difficulties." Nike Inc's current CEO said that Nike Inc's global inventory level is not expected to return to good condition until the second quarter of fiscal year 2021.
Before that, Nike Inc's pro-people discount activities in China may not stop.