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Consistent with its performance in earlier quarters, Nike Inc delivered another solid quarter in the three months to 29 February 2016, with healthy increases across all geographies and most product categories. Although revenues fell short of the expected US$8.2 billion, net sales were up 8% to US$8 billion, and on a constant currency basis they grew by 14%.
The US remains a key growth driver for Nike, accounting for the majority of global value sportswear sales. Not only is it the world’s largest sportswear market, but trends there define those in other regions. Nike’s unparalleled grasp on this market has enabled the company to obtain an enviable global brand status, and is likely to secure further growth.
However, with the arrival of new dynamic, niche players, such as Under Armour, this is no time to be complacent. Nike must be alert in keeping up its intense pace of innovation to fend off strong competition. The company’s Direct to Consumer strategy in the US market, driven by e-commerce, should also benefit the company, helping it to take greater control of its brand.
China is one of Nike’s most important growth opportunities. Nike’s opportunity in China comes from the country’s rapidly growing middle class. Now that the company has finally got its retail strategy, distribution and product mix right in China, it needs to build rapidly on it. To the distress of key rival, adidas, Nike’s aggressive push into Western Europe has resulted in Nike leading sportswear in the region. Nike is well placed to take advantage of the modest growth expected in sportswear in the region. Cementing its position further in the region would be the right decision for Nike going forward.
Euromonitor International has identified women’s products as a key growth opportunity for Nike over the forecast period. The brand is bullish on women’s products, and is looking to drive sales via both its own stores and partnerships with retailers such as Footlocker and Dick’s Sporting Goods. However, these products have seen massive interest from producers across apparel and footwear. Offering innovative, high-quality, technically advanced products is how the Nike brand will be able to generate loyalty among its consumers.
The Olympic Games taking place in Brazil during summer 2016 will give Nike a stronger boost to sales. The company typically releases its best technology at the Olympic events. The last example was Flyknit – featherlight shoes designed to feel more like a sock atop a sole. No doubt other brands, such as adidas, Under Armour, New Balance and Lululemon, will also step up innovation during this period, but all eyes will be on Nike, which is poised to be the true ground breaker here.