MONEY MAKER

2016 is shaping up to be Nike’s greatest year ever, thanks to China

Obsession
Business of Sport
Obsession
Business of Sport

“2015 was the single greatest calendar year ever for the Nike brand,” Trevor Edwards, Nike brand president, said on the company’s Dec. 22 earnings call.

There was a lot for the company to feel good about this quarter, including a 20% jump in profit, a climb of more than 50% in sales on Nike.com, and revenue totaling $7.7 billion—a 4% rise over the same period last year. But as good as those numbers are, 2016 already promises to be even better.

Orders for Nike products scheduled for delivery from Dec. 2015 through Apr. 2016 are already up 20% versus last year, reports Nike. These orders don’t guarantee revenue, but they’re a solid indicator of demand—and demand is rising, especially in China.

The country has a mushrooming middle class, and as a recent report by Morgan Stanley pointed out, rising incomes are often accompanied by greater participation in sports and more discretionary spending. The process is well underway: Gyms and health clubs have nearly doubled their revenue in China in the last five years, according to IBIS World data reported by the Wall Street Journal.

North America, of course, is still a much bigger market, but it’s far more mature. China, by comparison, leaves a lot of room to grow. Nike’s revenue in the country increased 28% in the recent quarter—far more than in any other region.

But China isn’t the only reason Nike has to be optimistic about 2016. In August, the Olympics start again, and if past years are any indication, Nike will use the opportunity to unveil the kind of big, press-grabbing innovation that helps the company remain the world’s largest sportswear brand.

Last time around, it was Flyknit, which Team USA wore prominently during the games and has since become a recognizable staple in Nike’s range of sneakers. Nike COO Eric Sprunk recently called the Flyknit sneaker his favorite and used it as an example of what the company could do with 3D printing.

What can we expect next year? Nike isn’t saying just yet, but keep your eyes on those Olympic podiums.

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