As a leader in the athletic sportswear category, Nike’s (NYSE:NKE) quarterly results not only bring an unofficial close to earnings season but are viewed as a barometer to consumer spending trends and the company’s success penetrating foreign markets. Wall Street will dissect FQ4 results next week for not only the welfare of the U.S. consumer but how the company performed in its most strategic markets.
A survey conducted by Citigroup analyst Paul Lejuez shows Nike (NKE) remains a global leader in athletic gear among North American, and European consumers. But there is another brand nipping at its heels and threatens the company’s popularity in one of its largest markets, China.
Lejuez asked 1,600 North American, 1,000 Chinese, and 900 European consumers a variety of questions to gage what brands they recommend to family and friends, what brand they considered purchasing next, and what brands were the most innovative.
The results were relatively consistent among North American and European consumers, with Nike (NKE) getting top rankings in both Net Promoter Score (NPS) and intent to purchase. Nike is also considered the most innovative brand. But Germany’s Adidas (ADDYY, ADDDF) is gaining ground and has closed the gap in certain categories among consumers.
Taking a closer look at the results within each group, Nike (NKE) maintained the top spot among consumers in both top of mind, and NPS, which measures the difference between the respondents who would recommend a given brand to their friend and family, and the respondents who would not. A positive NPS means that more respondents would recommend a brand, while negative implies fewer recommendations.
Among all the brands surveyed, Nike retained the highest NPS of 50, although down from 53 in March and tied with Adidas (ADDYY, ADDDF). Under Armour (UAA, UA) came in at #3 with a NPS score of 43 (down from 45), Hoka’s (DECK) NPS increased to 30 from 22, and On Holding (ONON) dropped to 18 in June from 28, previously.
When North American respondents were asked which brand they would purchase next, 29% said Nike (NKE) (down from 31%), followed by 19% for Adidas (ADDYY, ADDDF) (down from 21%), and New Balance at 10% (up from 7%). Hoka (DECK) received only 2% and On (ONON) took just 1%.
Next, the survey asked participants which brand they perceived as the most innovative. Not surprising, Nike (NKE) was again in the number one spot, followed by Adidas (ADDYY, ADDDF), New Balance, and Under Armour (UAA, UA).
The results were similar among European respondents with Nike (NKE) as the favored brand, as the most recommended among family and friends, most likely to be purchased next, and most innovative.
In China, however, Adidas (ADDYY, ADDDF) was the brand respondents would most likely purchase next, followed in second place by Nike (NKE). Adidas (ADDYY, ADDDF) was also perceived as being the most innovative, and had the highest NPS score of 50 (although down from 53 in the last survey). Nike(NKE) follows a distant second with a score of 43 (also down from 49) while Chinese brand Li Ning was third at 35. Adidas (ADDYY, ADDDF) was again picked as the favorite brand to purchase again and was tied with Nike (NKE) as the most recommended among family and friends, most likely to be purchased next, and most innovative.
These findings from Chinese consumers should give Nike (NKE) executives reason to be concerned, if they aren’t already. In 2023, China accounted for 15% of Nike’s total revenue, which eroded from 16% in 2022. And even while North America remains Nike’s biggest market (44% of revenue in 2023), Citigroup’s findings show the brand is losing traction here as well to its German rival.
For Adidas (ADDYY, ADDDF), China is its third-largest market with 15% of revenue generated in the country, and the company has ambitious plans to move more production to China and incorporate Chinese culture into its international designs. After losing market share in 2021-2022 amid COVID lockdowns and boycotts tied to the company’s stance on cotton/labor from the Xinjiang region, the company is making a much more aggressive effort to recapture lost market share and surpass Nike (NKE) as the leading sportswear brand in the country.
But don’t count out Nike’s (NKE) commitment to leave everything on the field when it comes to China.
“China is a very important market for Nike. It always has been and always will be. We’re committed to investing in China. We believe in China. We’ll keep doubling down on our proven playbook for success in driving innovative products in China,” Nike CEO John Donahoe said.
