The sales of Nike shoes and apparel were lackluster across most of the world. The exception was China, the world’s most populous market, where revenue jumped 19% last quarter. While public companies like Apple have struggled in China, the Nike brand has strengthened. Whether a trade war with China will hurt that growth is too early to tell.
Nike Inc.’s (NYSE: NKE) total revenue for the most recent quarter was $9.6 billion, up 7% from the same period a year ago. Income before taxes rose 11% to $1.29 billion. Nike China revenue was $1.6 billion. That puts it ahead of the traditionally strong markets of Latin America, where revenue for the past quarter was $1.3 billion, up only 3%.
At the current growth rate, within two years, Nike’s Chinese sales will approach those in Europe and the Middle East, where revenue was $2.4 billion last quarter, up 6%. The China growth rate also means the region’s revenue will approach that in Nike’s home market of North America, where sales last quarter were $3.8 billion, up 7%.
American companies that distribute products and services worldwide, including Nike, face the problem of growing tension between the two largest nations based on gross domestic product. Investors have supposed for several years that China could be a growth engine that keeps Nike’s revenue from flattening. It has not had that challenge since the Great Recession.
Nike’s potential problems in China also demonstrate how the stock market could be hit by tensions with the country. Its share price is up 57% over the past two years, while the Nasdaq is 33% higher. A hard hit in China means that Nike could give back some of, if not all, those gains.
Much of the conversation about China’s effect on the U.S. economy is based on manufactured goods, consumer electronics and agricultural products. Nike shows that the risk goes well beyond that.