The Retail Industry Takes Blows By A Variety Of Challenges, Including Concerns About Sluggish Demand In China.

Lately, the retail industry has faced a variety of challenges, including concerns about sluggish demand in China, a significant market that has recently been subject to restrictive regulations. Athletic firms throughout the world have felt the weight of these worries, but Baird sees some signs of promise.

Nike (NYSE: NKE) and Adidas (ADDYY) significant partners in China, Pou Sheng International Holdings (ticker: 3813. Hong Kong), reported a 19% year-over-year decline in May revenue on Friday. “The results were better than our worries given broad-based Covid-related lockdowns throughout the month, and the significantly poorer performance” in both of March and April, according to analyst Jonathan Komp.”

Another sequential improvement from prior months was the 31% drop in sales compared to the pre-pandemic period in 2019.

“The May numbers still reflect a significant reduction, we are hopeful anticipating an additional improvement in June because Shanghai (which is 10 percent + of China total sales for some) began relaxing limitations at the beginning of June,” he writes. “

According to statistics, such optimism is based on facts. Even though traffic in Shanghai has been low since the city’s first reopening, Crocs (CROX), On Holding (ONON), and Skechers (SKX) all reported somewhat better-than-expected results at their global consumer, technology, and services conference this week.

According to a report by Komp, the number of flights arriving and departing from major Chinese cities has been steadily increasing over the last few years, which is good news since it indicates that travel demand is on the rise.

Shares of Nike NKE –3.26 percent and Adidas ADIDAS –37 percent have both lost over 30 percent this year.

Nike’s stock has been battered by worries about the Chinese economy in the lead-up to its impending earnings report, scheduled at the end of the month. Investors are worried that the situation has worsened, even though the firm earlier said that it projected sequential improvement in its struggling China division.

Adidas made the same claim last month when it presented statistics for May.

International merchants would profit in two ways from China’s wider reopening: it would relieve supply chain issues and boost demand there.

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