Adidas, Nike, Apple Face Uncertain Future in Chinese Market

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By Published On: January 8, 20190 Comments

Analysts are concerned that weaker performance in the Chinese market could impact the bottom-line of some of the world’s biggest retail brands, both online and off.

After Apple announced lower-than-expected performance over the holiday season on January 2, questions have arisen over what a slow-down in the Chinese retail market could mean for some of the world’s biggest brands.

The tech company has started the New Year off in a slump, announcing a profit downgrade for what has traditionally been its busiest financial quarter. Off the back of the news, the company’s shares dropped roughly seven percent (when trade initially resumed).

According to Apple’s CEO, Tim Cook, slow iPhone sales wasn’t the only factor sending the company’s expected profits plummeting from its initial projection of between $89 and $93 billion for the quarter to $84 billion. 

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said in a note to investors.

An analysis of 30 publicly listed retail brands that currently operate within the Chinese market, however, has revealed that a downturn in China’s market could also impact a number of other notable retail brands, including the likes of Nike, Adidas and Tiffany & Co. Stock analysts, Wells Fargo reportedly believe that while some brands will be relatively unaffected, given only a small portion of their revenue (less than two percent) is generated through trade in China, others, like Adidas, could face an uncertain future both within the region, and its global operations as 18 percent of its total sales currently come from China. Similarly, Tiffany & Co generates 16 percent of its revenue in the region, followed closely by Nike at 15 percent.

While overall retail trade in China is still on the rise YOY (growing 8.1 percent in November 2018 compared to November 2017), the rate of its growth has been slowing in recent years. The current trade war raging between China and the US is believed to be one of the reasons for the region’s slowing growth. At the same time, however, other countries within Asia are experiencing exponential growth, with e-commerce in South-East Asia expected to reach $53 billion by 2023. Indonesia, Singapore and Malaysia are expected to drive this growth.

However, Wells Fargo does note that Apple isn’t necessarily an indication of what’s to come for the entire retail sector. For instance, the CEO of Nike, Mark Parker, recently told analysts that the business is yet to see any impact from China’s slowing growth on its bottom line. Adidas’ CEO, Kasper Rorsted has a similar view on trade in China to-date, claiming sales are still going strong. However, he does note that he expects the company’s growth in the region to start to stagnate next quarter because it would be impossible to maintain the business’s rapid Chinese growth in the long-term.

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