Secoo Collapses, Nike Stalls & PVH Shows Promise in China

Supply-side difficulties and a consumer retreat have affected Chinese business for Nike and Secoo, respectively, while PVH Corp’s brands are having a much easier time.

Nike Inc.

Steep declines in Greater China hit Nike in the three months to November 2021, with overall sales only marginally up by 1 percent to $11.4 billion (saved by the strong US and European markets).

In the sneakers and sportswear company’s fiscal second quarter of 2022, Greater China saw revenue fall by 20 percent to $1.84 billion, with all segments (footwear, apparel, and equipment) down. The company was beset by negative consumer sentiment in the past, though it says other operational factors are at play. Offsetting its Chinese contraction were strong gains in North America, where the brand was up 12 percent to $4.48 billion, and EMEA with a six-percent raise to $3.14 billion.

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Despite Nike being the number one sports brand on Tmall — where its flagship store added 13 million new members — sales were “overwhelmingly impacted by supply disruptions from Vietnam,” according to CFO Matt Friend. These also affected the wider Asia Pacific region.

In the same investor call, president and CEO John Donahoe commented: “Nike always has, and we always will take a long-term view in China. We’ve built a very strong connection with the consumer in China, and we’re going to continue to invest.” Friend added that although inventory supply has been disruptive, “we expect FY22 to be a year of recovery.”

Over the past month, Nike’s stock dropped 7.2 percent. But over one year, it has risen 7.3 percent.

PVH Corp

Fashion apparel house PVH Corp — the owner of the Calvin Klein and Tommy Hilfiger brands — has yet to pull sales back to pre-pandemic levels despite gains in its international businesses over the third quarter, with China playing a key role.

The company booked revenue for the three months ending October 31, 2021, of $2.33 billion, up by 10 percent, year-on-year, but down from the $2.43 billion generated over the same period in 2019.

PVH Corp — currently ranked 26th in our China Global Luxury Index — said it had logistics disruptions in October, such as US port delays, which had a four-percent negative impact. The brand took another four-percent reduction from the sale of its Heritage Brands business (IZOD, Van Heusen, Arrow, and Geoffrey Beene) to Authentic Brands Group. The deal closed on the first day of the third quarter.

There is some catching up to do on revenue, and PVH Corp is confident it can do that with a dedicated focus on Calvin Klein and Tommy Hilfiger, where its international business has exceeded pre-pandemic levels. During an investor call, CEO Stefan Larsson said that China led the company’s Asia growth, adding: “China’s 11/11 Singles’ Day outperformed our plan with double-digit sales increases for both Tommy and Calvin with strong full-price selling.”

Ahead of Singles’ Day, the company hosted a CK Jeans House of Denim pop-up in Shanghai, which drove over 300 million impressions on social media. Interactive experiences on Tmall and livestreaming events are also achieving high viewership. Special product capsules and 360-degree digital activations are also planned for the Lunar New Year.

Calvin Klein hosted a pop-up in Shanghai in November 2021. Photo: Weibo

PVH Corp’s two core brands have also led consumer engagement in the digital marketplace. E-commerce was one of the big winners in Q3, with revenue rising by approximately 15 percent. Digital penetration as a share of total revenue now stands at 21 percent.

For the full FY21, PVH Corp is projecting a revenue lift of 27-28 percent compared to 2020 at the top end of previous guidance. PVH shares rose in December on the back of its Q3 results announcement. Over the past month, the stock went up 5.2 percent, and over the past year, it is up almost three percent.

Secoo

The struggling luxury e-commerce player Secoo continues to lose its footing in China’s competitive online landscape, with sharp drops in sales, orders, and customers over the six months to June 2021.

Total revenue of $236.3 million (1.53 billion RMB) for 1H21 was down 34 percent compared to the same period in 2020, as orders slipped from 1.75 million to 1.44 million. The declines are due to consumers walking away from Secoo: in the six months to June, the upscale online platform lost almost 90,000 active customers, leaving it with just under 570,000.

Yet the company has dabbled in new projects. In March 2021, it partnered with the iconic London department store Liberty to launch a LIBERTY x SECOO collab gift box. Simultaneously, the two partners co-hosted a two-week offline exhibition for Liberty collections at Secoo HQs Club, marking the department store’s debut exhibition in China.

Secoo launched limited-edition gift boxes with Liberty to celebrate International Women’s Day. Photo: Secoo’s Weibo

Later in May, the company tied up with Zhuhai Duty Free Group to leverage their respective resources in the high-end supply chain, even extending to marketing promotion and livestream shopping. In the same month, Secoo also announced a strategy to capitalize on the opportunities presented by the development of Hainan as a free trade port.

In the company’s 1H21 results statement, CEO Richard Rixue Li did not address the serious business declines except to describe the macro environment as “challenging.” He promised to “provide a richer and more diversified product portfolio” and deepen brand relationships. CFO Shaojun Chen added: “Our focus going forward is to continue balancing profitability by increasing operating efficiency while honing our luxury selections.”

Over the past month, Secoo’s stock dropped by 10.5 percent — a continuation of its 82.4-percent drop over the past year.

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