early movers because they are mostly global brands that went through the wringer in China in 2022 with lockdowns, watched the excess inventory pile up, and all the while could hear the growing sound of footsteps behind them from some formidable domestic competitors.  Those domestic upstarts don’t have a cheering stadium crowd to egg them on, but they do have on their side increasingly nationalistic voices within the government and on social media. Nike, the market leader, is shrugging it off. The company believes, publicly at least, that a corner has been turned and it is beginning to strut again, if not going so far as to thump its chest. Its sales in China in FY23, which concluded on 31 May, were US$7.2 billion, or 14 per cent of total company revenues of $51.2 billion. Compared with the situation pre-Covid, the glass is only half full though; in fiscal 2019, the Greater China business brought in $6.2 billion, or 16 per cent of total company revenues of $39.1 billion, so although China sales have grown by $1 billion since then, their contribution to the company is lower because business in the other regions has grown faster. In FY23 alone, while total company revenues increased by 10 per cent, sales in Greater China were actually down 4 per cent, although to be fair they would have been up 4 per cent had the Chinese currency not depreciated against the US dollar. Trying to get insight into how the underlying China business is really going, however, is like looking at an old Polaroid that’s been left in the sun. Where can we go for a clearer picture of Nike’s competitive position in China? The fiscal quarter that ended 31 May isn’t very helpful, because it corresponded to a period with some of the worst lockdowns. Recall, for example, that Shanghai had a two-month lockdown in April and May 2022 that bordered on savagery. No surprise then that Nike’s China sales for the corresponding quarter this year were up by 16 per cent (or 25 per cent when adjusted for adverse currency movement). Despite the lack of clarity in the numbers, Nike President and CEO John Donahoe is heartened, telling investors on a conference call: “With our record-breaking performance during this year’s 6/18 shopping holiday, in which we were the No. 1 sports brand on Tmall, I’m even more confident in our playbook and strategy [in China].” No bed of roses for competing brands either Nike’s key competitors among the global brands in China haven’t been living in the lap of luxury either. Adidas, in its latest release, for the first quarter, reported an 11.9 per cent year-over-year sales decline in Greater China. Another global athletic brand with high hopes pinned on the China market is Puma, and it has only just resumed growth in China, in the first quarter of this year. Puma didn’t break out its China results specifically, saying only that sales grew by 27.4 per cent in the APAC region as a whole and Greater China had “returned to growth” after “two years of declining business”. Domestic companies like Anta and Li-Ning, which are largely unknown outside of China itself, have been gaining ground by improving both the technology and style in their products. Both brought in total revenue of about $3.6 billion in 2022, giving them a combined take in the same ballpark as Nike’s revenue in China. Chinese nationalism has helped both of them get a leg up and although it is difficult to predict how sustained an effect nationalism can have, few could argue that bias toward domestic brands is not a powerful force behind consumer buying habits, not only in China but everywhere. The pie is growing Promisingly, the total pie is growing, thanks to income growth, the success of Chinese athletes in international competition and a general shift in lifestyle toward greater fitness, reflected in such things as rising gym membership. The fashion element is also huge: Chinese consumers love bright colours and conspicuous designs, predilections that the sneaker manufacturers eagerly service. Nike, Adidas and Puma are, of course, heavily invested in the global marketplace and China is only one part of it. CEO Donahoe said “In FY23, Global Football grew 25 per cent, nearly doubling total Nike growth, with the women’s and kids businesses growing even faster. Key boot franchises like Mercurial and Phantom saw high full-price realisation, as we continue to win share on-pitch.” The marketing muscle helps: the latest sports icon to join the Nike stable is Manchester City footballer Erling Haaland, and of course the women’s World Cup tournament beginning in Australia and New Zealand in July provides an outstanding platform to promote athletic footwear and apparel brands. Globally then, Nike’s revenues are still growing strongly, though not equally across platforms; direct sales from Nike’s own physical and digital stores are experiencing strong growth while wholesale is slipping. It all comes at a cost While Nike’s global top line grew strongly in FY23 as a whole, gross margin was down a whopping 250 basis points, due to higher input, freight and logistics costs, and markdowns to clear unsold inventory. However, the company implies that the excess inventory nasties in North America and Greater China have now been done away with and it is going into FY24 with a clean slate. Other operating costs are also up though, due to the marketing and advertising costs that Nike charmingly refers to as “demand creation” (+5 per cent) and wages, as well as certain technology investments. Net income for the year was $5.1 billion, down 16 per cent from FY22.  As for China, the remaining two quarters of the 2023 calendar year will continue to have comparability problems because of 2022 lockdowns. It may not be until next year that we get a handle on where the business is truly going.