Weak visibility in China hurts investor sentiment on sports equipment manufacturers

Unless there is a turnaround in the trend, and it is not perceptible at this stage, the sales of the major international sports equipment manufacturers in China should turn out to be poor. Investors will know more when Nike, Adidas and Puma, dubbed the Big 3, launch their quarterly earnings race from mid-February, but industry insiders are already looking negative. like the Stifel firm. ” Major international brands are still a long way from recovering from the Uyghur controversy, which began to damage their reputation in late March 2021, the analyst wrote in a note to clients on Tuesday. Local brands such as Anta, Li-Ning or Xtep have benefited from this situation, in a weaker macroeconomic context and disruptions linked to the pandemic and Beijing’s ‘zero tolerance’ policy in the run-up to the Olympic Games in winter. »

Stock market penalty

In the second quarter of its 2021-2022 fiscal year (September-November), Nike recorded a 20% drop in sales in China, and even 24% at constant exchange rates. Adidas did not shine more. In the third quarter, its revenues in Greater China fell by 11% (-14.6% at constant currencies), and Stifel, unenthusiastic, estimates that activity could suffer a 25% slowdown in the period October-December , i.e. 20% less sales in two years. And Puma? The German group does not systematically communicate on its performance in China, which is drowned in that of the Asia-Pacific region. ” We expect a contraction of 30% in the fourth quarter and 13% over two years », calculates the analyst. In 2022, the horizon should clear up. The firm predicts a 10% rebound in sales for Adidas in China and 20% for Puma. As for Nike, it foresees a sequential improvement in its performance. The low visibility of the three players in China is penalized on the stock market. Since 1^er January, Nike and Puma show declines of more than 11%, while Adidas has to settle for a meager gain of 1.5%.

Take comfort, the bad news should only concern the first line of the income statement. The product mix, the ramping up of Internet sales and promotions limited to what is strictly necessary will help safeguard the gross margin, despite cost inflation (freight, energy, raw materials) and logistical disruptions.