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(NYSE: NIKE) Adidas can breathe a sigh of relief now that the corona closure in China has been lifted and traffic in the country is expected to return to the series.
The retail market has been hit for several different reasons over the past few months, with one of the concerns being low demand in the China region, a significant market for local fashion companies, which has been hurting itself as a result of the renewed corona closure.
Local retailer Pou Sheng, a partner of Adidas and Nike, reported revenue in May fell just 19% from last year. Despite the fact that it is still declining, analyst Jonathan Comp notes that “the results were better than expected, caused by the closures during the months of March and April.”
Also, Pao Sheng sales were down about 31% compared to pre-epidemic sales figures at the end of 2019, another encouraging figure compared to recent months.
Meanwhile, although the May results showed some decline, many factors remain optimistic, believing that the June results will continue to show improvement, especially when Shanghai – where about 10% + is sold – of all goods from certain suppliers throughout China) – Began lifting the closure restrictions earlier this month.
In addition, insiders point out how flights to and from key Chinese cities are also boosting civilian traffic. Although these numbers are lower than before, these data show how some cities are starting to recover from the outbreak of the virus, a positive sign when the question is whether the increase in volatility will increase demand for products.
Nike has lost nearly 30 percent in New York since the beginning of the year, from $ 161.31 to a closing price of $ 114.73 yesterday. In Germany, Adidas lost 37% on the local Xetra stock exchange, from 259.1 euros earlier this year to 162.3 euros.
Difficulties in China have made it very difficult for Nike in terms of second quarter reports, which are expected to be completed by the end of next month. Although the company announced at the time of publication of the previous reports that it expects its reports in the coming quarter to improve as a result of a return to the Chinese sales routine, it seems that the situation has worsened since then, which has left its investors worried.
As is known, Nike reported sales of $ 12.25 billion compared to expectations of $ 12.46 billion. The company reported earnings of $ 1.16 per share, above expectations of $ 1.11 per share. The company then blamed quite a few things for missing out on sales expectations, with one of the main factors being the damage to Chinese sales. Adidas, which published its reports last month, also blamed the Chinese damage on the negative results.
China’s reopening is expected to have a positive effect on two main factors, with the first time easing the supply chains a little, and helping the domestic consumer to purchase the products he is interested in for the second time.
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