Michael Jordan, Kobe Bryant, Lebron James are huge figures in China and within the Nike (NKE) - Get Report empire. They carry gravitas in the world's second largest economy unmatched by just about any other athlete, actor, musical act or celebrity.
But despite having some of the most well-known spokespeople and owning about a quarter of the athletic shoe market there, the athletic apparel giant is losing ground fast in China's $31 billion sports apparel market.
The culprit is to none other than German athletic company Adidas (ADDYY) . Adidas has already been eating Nike's lunch in the U.S. as the company continues to use premium pricing to attract customers known for their lavish tastes and trends don't seem to be leaning in Nike's favor.
The fact that the company is gaining traction in China, where retail sales are expected to grow about 10% in 2017, according China's National Bureau of Statistics, coupled with Nike's struggles in North America, has led one analyst to insist you should stay on the sidelines when it comes to Nike's stock.
"From our perspective, it is still too soon to buy Nike," wrote Piper Jaffray analysts Erinn E. Murphy in a note this week, pointing out that Nike contributed $3.3 billion in growth in the North America, Western Europe and China sportswear market in 2016 while Adidas contributed about $4.4 billion.
"Just two years ago, roles were reversed," the analyst noted. "The dollar growth delta between Adidas and Nike will shift even more favorably toward Adidas during 2017."
In China, in particular Adidas mustered 2% growth in 2016 and captured about $19.9 % of the athletic apparel market. Nike, on the other hand, ended 2016 with about 22.7% market share.
Adidas clawing sales away from Nike was on display in each company's most recent quarter.
Nike saw third quarter revenue rise 5% to $8.4 billion, a hair under analysts' expectations of $8.47 billion. However, it posted earnings of 68 cents a share, crushing Wall Street's estimations for 53 cents a share.
But the market reacted harshly to Nike's results, likely a result of the slight sales miss, the company's 140 basis point decline in gross margin, unfavorable changes in foreign exchange rates and the impact of higher off-price sales. Further, Nike revealed on an earnings call that futures orders in North America -- a key measure of future demand from major retailers -- fell a worrying 9%.
Nike's stock is down nearly 3% over the last month, under-performing the Dow Jones Industrial Average's 0.9% drop.
Meanwhile, shares of Adidas are hovering near a 10-year high following very strong full-year earnings and guidance.
Sales last year rose an impressive 18%, while net profit surged 41%. Even the Reebok brand -- always seen as the red-headed stepchild in the Adidas portfolio -- notched a 6% sales increase last year. The brand had double-digit sales increases in its Classics category and mid-single-digit growth in the training and running categories, the latter powered in large part by marketing for Crossfit-related products (Reebok is the exclusive licensee of Crossfit).
Releasing buzz-creating sneakers like these new 3D printed version should only fuel interest in what Adidas is working on.
Lebron, react to Nike's woes? Don't think so:
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