Is Nike a Chinese company?
Chief executive John Donahoe said "Nike is a brand that is of China and for China" in response to a question about competition from Chinese brands. BBC NewsNike boss defends firm’s business in China
TAIPEI (Taiwan News) — Following Chinese anger at Nike’s concern over the alleged use of Uyghur forced labor in the production of cotton, CEO John Donahoe described the company as “a brand that is of China and for China.”
The executive made the comments during a discussion about Nike’s latest earnings with Wall Street analysts, BBC reported Friday (June 25).
Several major international fashion brands, including Sweden’s H&M, voiced concern earlier this year about repression of the Uyghur population in Xinjiang by China’s communist regime. Apart from the allegation that thousands of Uyghurs had been locked up in camps, there were also reports that China was using them as forced labor, including in cotton fields.
Angry Chinese consumers launched boycotts against their products. In response, Donahoe emphasized Nike’s more than 40 years of doing business in China, adding it would continue to be a growing market for the brand.
According to the company’s latest earnings report, its revenues in China rose to more than US$1.9 billion (NT$52.98 billion), below Wall Street analysts’ predictions of US$2.2 billion, BBC reported.
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27 June, 2021 - 04:06pm
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Nike CEO John Donahoe called the sportswear apparel giant a "brand of China" this week, following a fiasco it was involved in earlier this year over concerns about human rights abuses committed by the communist government.
During an earnings call this week, Donahoe explained that Nike had a long-term view of its operations in China, where it had been operating for about four decades.
"We are the largest sport brand there, and we are a brand of China and for China," Donahoe said. "And the biggest asset we have in China is the consumer equity. Consumers feel a strong, deep connection to the NIKE, Jordan and Converse brands in China. And it’s real."
Donahoe went on to say that the company intended to keep investing in its China operations as it reported better than expected revenues in its fiscal fourth quarter. Its sales in China missed Wall Street expectations.
Shares of Nike hit an all-time high during Friday's trading session, driven by its strong financial results.
Nike recently came under fire in China for a comment it made raising concerns about forced labor practices in the Xinjiang Uyghur Autonomous Region (XUAR). It reassured customers that it does not source textiles or products from the region, like cotton.
After the U.S. and other Western countries responded to the forced labor allegations with sanctions, its statement was resurfaced and resulted in calls among Chinese consumers to boycott the brand – as well as others like H&M.
The Chinese government has characterized companies' decisions to avoid using cotton sourced from the region as an effort to undermine its economy.
U.S. companies are increasingly coming under scrutiny over their operations in China, where critics wonder how far they have to bend their practices in order to satisfy the communist government.
Apple, for example, was the subject of a New York Times report last month claiming the company abandoned some of its security policies in China because they are not allowed.
The Times said that the company has put the data of its customers at risk and has aided the Chinese government in censorship of its app store in order to meet regulators' requirements, which Apple refuted.
27 June, 2021 - 04:06pm
What Happened: NIKE, Inc. reported financial results for its fiscal 2021 fourth quarter and the full year ending May 31, 2021.
According to the report, fourth-quarter reported revenues were $12.3 billion, up 96 percent compared to the prior year and increasing 21 percent over the same period in 2019. For the year ending May 31, 2021, Nike reported revenues growing by 19 percent to $44.5 billion.
Nike delivered record results thanks to high revenues in the North American market. But in Greater China, sales only grew by 17 percent, although China has been among Nike’s top markets. The BBC emphasizes that revenues from China grew to more than $1.9 billion, but they missed Wall Street expectations of $2.2 billion.
The Jing Take: Investors know they need to read between the lines and understand that, despite Nike’s strong growth curve, the latest financial results reveal troubles in China.
While Nike built positive momentum on fantastic results in the North American market amid a global demand surge for comfy clothes, these results do not reflect the realities of the Chinese market.
In the US, Nike is a national symbol that is associated with the likes of Colin Kaepernick. Athleisure also continues to see vigorous growth because consumers are still seeking comfortable clothes (not having fully returned to their pre-pandemic ways). However, this is a temporary change, and Nike must adapt its business to a post-COVID-19 reality.
Meanwhile, Nike shouldn’t underestimate the impact of consumer boycotts in China. Nike chief executive John Donahoe said, “Nike is a brand that is of China and for China.” But Chinese consumers expect more than words from their brands, and actions speak louder than comments from executives.
While Donahoe might see Nike as a brand “for China,” local consumers might continue to boycott the American brand based on its stance on Xinjiang cotton. He emphasized that Nike has a four-decade history in China, saying, “Phil [Knight] invested significant time and energy in China in the early days, and today, we’re the largest sports brand there.”
Donahoe is correct in this statement, but he fails to acknowledge that, back then, Nike didn’t have to fight off competition from strong domestic rivals like Anta Sports and Li-Ning. In fact, times have changed. In the past, Nike managed to build a global social-purpose strategy and steer clear of controversial matters in China. However, that does not appear to be the case today.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
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27 June, 2021 - 04:06pm
Nike drew backlash in China in March after it issued a statement expressing concern over reports of forced labor in the Xinjiang region.
Other Western companies also expressed concerns about forced labor of minority Uyghurs in cotton production.
"Nike does not source products from [Xinjiang] and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region," Nike said in a statement at the time.
Nike had reported a strong fourth quarter, with a total revenue of $12.3 billion and a profit of $1.5 billion. Additionally, sales in North America rose 141 percent year over year, equating to $5.38 billion.
Sales in China fell slightly short of expectations, as Nike reported $1.93 billion in revenue instead of the expected $2.25 that analysts hoped for, Fox Business reported.
Donahoe in the call this week expressed optimism about business in China, noting that "today we're the largest sport brand there," according to the BBC.
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27 June, 2021 - 04:06pm
26 June, 2021 - 02:15pm
Nike Chief Executive John Donahoe says his branding mission is all about Beijing.
“Phil [Knight] invested significant time and energy in China in the early days and today we’re the largest sport brand there,” Mr. Donahoe said.
Mr. Donahoe’s comments appear to be a rhetorical salve to ease Chinese outrage over the company’s questioning of labor standards in the communist country.
“We are concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR),” the company said in a statement this year. “Nike does not source products from the XUAR and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”
Angry users of the Chinese social media platform Weibo dominated trending feeds, and “popular Chinese actor Wang Yibo terminated his contract as a representative for Nike,” CNBC reported in late March.
26 June, 2021 - 09:36am
The CEO of Nike said the company is a 'brand of China' during a recent earnings call, defending the company's position in the country.
The comments come months after the sportswear apparel company was embroiled in controversy over alleged human rights abuses in the country.
This week, CEO John Donahoe conducted his quarterly earnings report for the company. He was asked about the company's plan in China by an analyst.
'We've been in China for over 40 years, still invested significant time and energy in China in the early days and today we're the largest sport brand there and we're a brand of China and for China,' Donahoe responded, according to a transcript published by Nasdaq.
'We'll continue our long-term investment in China,' Donahoe later added.
During the earnings call, it was revealed that Q4 revenue in the country rose 9 percent on a currency neutral basis.
President and CEO John Donahoe made the China comments during a recent earnings call
Additionally, the company saw double-digit growth in the country for the seventh consecutive year.
Despite the growth, sales in the Greater China area actually failed to hit Wall Street expectations this past year.
Revenue in the region rose 17 percent year-over-year to $1.93 billion, but analysts were expecting that number to be around $2.25 billion, Fox Business reports.
In total, Nike reported a 96 percent rise in total revenue from last year, up to $12.34 billion. The bet income for the company was $1.5 billion.
In North America, sales rose 141 percent year-over-year, reaching a record of $5.38 billion on the continent.
The positive financial results for the company led to a 15.38 percent rise in shares on the stock market on Friday.
Shares closed the day at $154.35, a new record for Nike.
While China no longer appears to be the driving force in Nike's COVID-19 recovery, analysts don't believe sales growth will slow much more in the region.
'Nike is a long-term outperformer in our view,' said UBS analysts Jay Sole and Mauricio Serna.
People walk by a Nike store in Beijing, China. The CEO of the company recently said Nike is 'a brand of China and for China'
Earlier this year, Nike was among the companies accused of getting supplies from factories using forced labor in a report on China.
The UK's Conservative Party Human Rights Commission report said that tens of thousands of Uyghur Muslims had been transported to factories across the country to work.
The report noted that one of the 'most shocking new developments' in the last five years was that forced labor was now used 'throughout China in factories which are part of the supply chain of major international corporations.'
It went on: 'Under conditions that strongly suggest forced labor, Uyghurs are working in factories that are in the supply chains of at least 83 well-known global brands in the technology, clothing and automotive sectors, including Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen.'
Vicky Xiuzhong Xu and Nathan Ruser, who were authors of a report by the Australian Strategic Policy Institute (ASPI) about the forced labor of Uyghurs, gave evidence to the Commission in an online hearing.
They said they had discovered in 2019 that Uyghurs were being transported from Xinjang to other provinces to work.
Xu and Ruser said 'it is a policy of the central government' that resulted in 'tens of thousands of people pushed out of their homes every year and sent to eastern provinces to work in the supply chains of international brands.'
They added that in the factories workers were subjected to the conditions of forced labor, having to work 'under heavy surveillance' and in the few hours of free time were 'compelled to attend Mandarin Chinese language classes and political indoctrination classes'.
ASPI identified 27 factories in nine Chinese provinces that are using Uyghur labor transferred from Xinjang since 2017.
'We'll continue our long-term investment in China,' Donahoe (right) added during the call
Nike responded: 'We are concerned about reports of forced labor in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR).
'Nike does not source products from the XUAR and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.
'The Nike Code of Conduct and Code Leadership Standards have requirements prohibiting any type of prison, forced, bonded or indentured labor, including detailed provisions for freedom of movement and prohibitions on discrimination based on ethnic background or religion.'
The controversy was not addressed during the earnings call, according to the transcript.
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26 June, 2021 - 02:24am
The comments by Donahoe over Nike's possible more investments in China interestingly comes months after the sportswear giant had raised concerns about forced labour practices in the Xinjiang Uyghur Autonomous Region (XUAR).
Nike CEO John Donahoe called the sportswear apparel giant a “brand of China” this week, months after the sportswear giant had entangled in a fiasco in China over its statements expressing concerns about human rights abuses committed in Xinjiang province by the Communist government.
According to the reports, Donahoe defended the firm’s business in China and stated that Nike had a long-term view of its operations in the Communist country, where it has been operating for over four decades. Donahoe said he remained confident that China will be their fast-growing market due to its many years of investment in the country.
“We are the largest sports brand there, and we are a brand of China and for China,” Donahoe said, adding, “And the biggest asset we have in China is the consumer equity. Consumers feel a strong, deep connection to the NIKE, Jordan and Converse brands in China. And it’s real.”
Speaking during a call with Wall Street analysts about Nike’s latest earnings report, Donahoe claimed that Nike intends to keep investing in its China operations as it reported better than expected revenues in its fiscal fourth quarter. Donahoe made the comments after released its Nike’s fourth-quarter earnings, which showed revenues had doubled to $12.3bn (£8.8bn) in the first three quarters of the year.
The latest figures show that Nike has bounced back from a $790m loss during the pandemic a year earlier to nearly $1.5bn profit. The figures also showed that revenue in China increased to more than $1.9bn, however, it missed Wall Street expectations of $2.2bn.
In addition, the shares of Nike has also hit an all-time high during Friday’s trading session, due to its strong financial results.
The comments by Donahoe over Nike’s possible more investments in China interestingly comes months after the sportswear giant had raised concerns about forced labour practices in the Xinjiang Uyghur Autonomous Region (XUAR).
In an official statement, Nike had stated, “We are concerned about reports of forced labour in, and connected to, the Xinjiang Uyghur Autonomous Region (XUAR). We have been conducting ongoing diligence with our suppliers in China to identify and assess potential forced labour risks related to the employment of Uyghurs, or other ethnic minorities from XUAR, in other parts of China.”
The company also specified, “Nike does not source products from the XUAR, and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”
Joining Nike, several other brands such as H&M had made the statement last year stating that it will no longer be procuring cotton from Xinjiang after reports revealed forced labour by Uyghur Muslims.
However, the boycott by Nike and other apparel brands had not gone well within the Communist country, which had said companies’ decisions to avoid using cotton sourced from the region as an effort to undermine its economy.
These brands had become the target of netizens in China after their stance over Xinjiang cotton supply issues. The Chinese netizens had reportedly called for a boycott of these brands in China. Several celebrities, including pop star and then-Nike brand ambassador Wang Yibo, had said they would cut ties with the sportswear maker for their comments on forced labour in Xinjiang province.
In Match 2020, the Australian Strategic Policy Institute (ASPI) had released a report on the condition of Uyghur and other ethnic minority citizens from the far west region of Xinjiang. The report detailed out how ethnic people from the said region have been mass transferred across the country. The conditions they work in suggest forced labour, the report said.
The report suggested that as many as 82 well-known global brands in sectors including technology, clothing and automotive sectors have such workers in their suppliers’ factories in China. These companies include major names such as Apple, BMW, Gap, Huawei, Nike, Samsung, Sony and Volkswagen.
As per the report, more than 80,000 Uyghurs were transferred to different parts of the country between 2017 and 2019. Some of them were sent directly from the detention camps. The number included in the report was conservative, and the actual numbers can be much higher. These workers not only work as forced labour but have to undergo compulsory organised Mandarin and ideological training outside working hours. These slave labours are constantly under surveillance and not allowed to take part in any religious observations.
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25 June, 2021 - 10:36am
Nike Just Did It. And by It, we mean blow the doors off its latest quarterly report. Nike, Inc. (NYSE:NKE) is up 14% to trade at $152.24 at last check, after the blue-chip retailer reported adjusted fourth-quarter earnings of 93 cents per share, hurtling past the estimated 52 cents per share. Not only was revenue in line with expectations, but a $50 billion sales outlook roared past Wall Street estimates. It appears as socialization starts to drift toward pre-pandemic levels, shoe sales -- especially fashion-forward brands such as Jordan -- are reaping the benefits.
Analysts have rushed to adjust their stance. At last check, 12 analysts have issued price-target hikes, the highest coming from Stifel to $214 from $168. Barclays noted the "worst is now behind NKE." With Euro's in full swing and the Tokyo Olympics coming up, Nike is in pole position to take advantage of the exposure, with its latest gear on full display all summer. To underscore the impact of this report, retail stock Foot Locker (FL), as well as sector peers Adidas and Puma, are all higher today and enjoying the halo lift.
Prior to today's breakout, Nike stock had been staring up at its 100-day moving average since a mid-March post-earnings bear gap. The gains today have NKE reclaiming its year-to-date breakeven level, and padding its 49% year-over-year gain.
There isn't much contrarian pessimism to be unwound; most analysts are already bullish on NKE and a slim 2.1% of the stock's total available float is sold short. That said, now may be the right time to weigh in on the equity's next move with options. This is per the equity's Schaeffer's Volatility Index (SVI) of 24%, which stands in the extremely low 4th percentile of readings from the past year. In simpler terms, options players are now pricing in low volatility expectations.
The options pits are responding how you'd imagine. In just the first two hours of trading, 315,000 contracts have changed hands, volume that's 15 times the average intraday amount. The July 150 call is seeing notable attention, indicating some options bulls are banking on this breakout from NKE to last into the heat of summer.
Make the Most of the next Expiration Week Countdown!