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Nike's China shutdown could be offset by the strength of its app

3 weeks ago by Jon Marino in Consumer

All of a sudden, Nike ($NYSE:NKE) has a new problem in China. 

Our map, above, tracks more than 1,200 Nike store locations in China and about a dozen factories, which may also be impacted by the company's recent decision to suspend operations in half of its stores, as part of its response to the continuing Coronavirus outbreak situation unfolding across the country. 

And, some analysts are down on Nike as a result. 

Following the lead of other major consumer brands, the athletic-wear maker is shutting down half its stores - "and they're operating with reduced hours and slow traffic," analysts with Wells Fargo Securities noted in a report February 5. Analysts cut "our Greater China growth estimates to +9% in both 3Q20 and 4Q20 (from our prior +17% estimates)," noting that even their more optimistic estimates still would represent "a meaningful deceleration from 2Q's growth rate of 23%." 

Ouch. So with China's oversized contribution to Nike's top line, what's the Oregon-based maker of all-things-sport to do? 

Rely on its app, for starters. 

Nike has a terrific advantage it can put to use, that other major US consumer companies (like Starbucks) dependent on the Chinese market cannot summon: it has the ability to run a big portion of its business off its app

"The Chinese consumers already telling us they're excited about the Nike app, downloading 1 million times during launch," departing Nike CEO Mark Parker said on the company's December earnings call before it announced the China closures. "Incredibly, it’s already the number one shopping app in China."

And, our chart above reflects this strength. Not only have Nike's primary app's ratings in the Apple ($NASDAQ:AAPL) Store risen about 48%  - but its rating (not shown) is higher than 4.95-out-of-5, an extraordinarily high rating. Google Store ratings (not shown) have grown by an even greater percentage over the last year, signaling Nike's digital adoption is growing more via its operating system. 

Wells Fargo analysts wrote in their Wednesday report that "we don't think this would represent a meaningful buying opportunity," but since the shares have traded up over the last few days, it doesn't seem like the market is going to give investors much of a discount window, anyway. 

About the Data:

Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales and app ratings - and creates data sets that measure factors like hiring, revenue and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales. 

Further Reading: 

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Jon Marino

Jon Marino is Thinknum's finance editor, covering the impacts of alternative data on public companies and investors. Prior to joining Thinknum, Jon worked in the ...

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