Asics Defies Nike’s China Underperformance in Return to Profit

Sneaker maker Asics Corp. appears to have dodged the controversies in China that tripped up Nike Inc. last quarter, as the Japanese company’s performance there propelled it back to profit in 2021.

Foreign sports brands struggled in China last year as controversy erupted over cotton sourced from the Xinjiang region, with patriotic consumers ditching the likes of Nike and Adidas AG in favour of local brands.

That’s made Asics’s performance a surprise, with a preliminary report for the year ended December showing net income of 9 billion yen ($78 million) — more than double its guidance. Its shares in Tokyo surged as much as 15 percent, the best performance since May.

“The announcement looked reassuring based on steady growth in key areas and strong performance in China, in contrast to Nike’s Footwear/Greater China business,” SMBC Nikko Securities Inc. analysts Kenya Matsuo and Kuni Kanamori wrote in a note Tuesday.

Asics shares still remain down more than 3 percent in 2022, though Chinese brands that surged last year as they benefited from the travails of foreign rivals have also had muted starts to this year. Li Ning Co. is down 12 percent, while Anta Sports Products Ltd. is flat.

Nike Shares Lose Out to China Rivals After Xinjiang Accusations

In contrast to more outspoken Western brands, Japanese firms have largely sought to steer clear of the question of cotton sourced from the Xinjiang region. That’s been in keeping with the country as a whole, which has sought to maintain steady relations with its largest trading partner as well as with the US.

Still, things may get trickier for Japanese brands now after the nation’s parliament on Tuesday passed a resolution expressing concern about Uyghur human rights. This was swiftly condemned by China as “extremely vile in nature.”

Just avoiding the issue has not always been enough to save some foreign brands, with Chinese consumers and celebrity endorsers denouncing those that have failed to sufficiently embrace the cotton. A Chinese marathon was reported to have suspended Asics’ sponsorship last year amid mixed messages on the issue from its Chinese and Japanese offices.

Asics was also the maker of the Japan national team’s clothing for the delayed Tokyo Olympic Games. While it made gear for Japan’s competitors at the 2018 PyeongChang Winter Olympics, athletes at the Beijing Games set to start Friday will have outfits made by a Osaka-based Descente Ltd.

Asics reports full earnings on Feb. 10.

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Japanese Brands Take Divergent Positions on Xinjiang Cotton

As backlash over stances on Xinjiang cotton grows, Japanese brands face a familiar predicament in deciding how to proceed.