Date
28 July 2017
Strong China sales growth and cost reduction helped Nike achieve 19.1 percent profit gain in the latest quarter. Photo:  Reuters
Strong China sales growth and cost reduction helped Nike achieve 19.1 percent profit gain in the latest quarter. Photo: Reuters

Nike steps up online push with Amazon deal

Nike, the world’s largest footwear maker, has confirmed a partnership with Amazon. Nike unveiled on Thursday a pilot program to sell certain products on the tech giant’s online platform.

Nike chief executive Mark Parker said the pilot program will include a small, carefully segmented assortment of footwear, apparel and accessories in order to improve customer experience.

At the same time, the global sportswear group has also made a similar arrangement with the photo-sharing app Instagram.

It’s estimated that its partnership with Amazon could generate an additional US$300 million to US$500 million in revenue in the United States or 1 percent of its total sales, Goldman Sachs analysts said in a client note.

With strong earnings released on the same day, Nike shares soared more than 9 percent at one point.

Nike reported its fourth-quarter revenue rose 5.3 percent year on year to US$8.68 billion, bolstered by strong growth in China and other emerging markets.

In fact, US market sales were flat year-over-year in the quarter ended May 31, while its second-largest market — western Europe — posted 4 percent growth. By contrast, the Greater China market reported a strong growth rate of 11 percent, driven by robust demand for Jordan sneakers, athletic shoes and apparel.

Meanwhile, sales costs and management expenses dropped 4 percent to US$2.7 billion, leading to a 19.1 percent jump in net profit to US$1.01 billion.

In order to revamp its global operations amid intensifying competition, Nike announced a 2 percent cut in its workforce in mid-June. It would affect about 1,400 workers.

Nike would also eliminate a quarter of its shoe styles as well as cut the time it takes to create new products.

In China, the brand is also fine-tuning its approach and offerings on Tmall to better serve mainland customers.

This article appeared in the Hong Kong Economic Journal on July 1

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal

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