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Nike expects $1 billion China sales in year
2007-10-18
Nike Inc (NKE.N) sales in China are growing at over 50 percent annually and will reach $1 billion within a year, making the mainland its second largest market globally, Chief Executive Mark Parker said on Thursday. Nike, the world's largest athletic shoe and clothing maker, opened its company-owned flagship store in Beijing two months ago and said it would soon establish a studio in China to design products for the domestic and international markets. "We are growing at 50 percent-plus in China," Parker told Reuters in an interview. "And we can maintain that for the foreseeable future." While the firm's revenue in the last quarter topped analysts' forecasts, growth in the United States, Nike's largest market, was only 2 percent. Revenues jumped 16 percent in Europe, 22 percent in Asia Pacific and 15 percent in the non-U.S. Americas. China is the Beaverton, Oregon-based company's fastest growing market and a key to reaching its target of $23 billion in sales by 2011. "We are bullish on growth opportunities and China is leading the way," said Parker from Nike's exhibition centre in Beijing's thriving 798 art district. "Within a year," said Parker when asked how soon Nike would realize $1 billion in China sales. Nike is also building on its leading market share in the mainland, currently its fourth-largest market with about $600 million in annual sales. "We are about 35-40 percent bigger than the next sports brand in China," he said. "And extending our leading position." Nike figures it commands about a third of the China market and is adding to that advantage each quarter. The company also relies on China to produce about 45 percent of its sports apparel and shoes that are sold worldwide, flowing out of 237 factories in its global network of contract manufacturers. China's efficient manufacturers helped Nike expand gross profit margins to 44.8 percent in the most recent quarter from 44.1 percent in a year earlier. Nike has about 3,000 retail outlets operated by distributors in 300 cities around China, but most of the growth is still concentrated in the six large markets like Beijing and Shanghai. "We aren't mature by any stretch," said Parker. Nike's distribution network in China is unique because 85 percent of its retail "doors" sell Nike products exclusively. Nike posted a 51 percent rise in net profit to $569.7 million in the most recent quarter, topping Wall Street targets and raised its fiscal 2008 revenue outlook. ($1=7.52 yuan)
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