NIKE Inc. (NYSE:NKE) is engaged in the design, development and worldwide marketing and selling of footwear, apparel, equipment, accessories and services. NIKE is a seller of athletic footwear and athletic apparel worldwide. The company sells its products to retail accounts, through NIKE-owned retail stores and Internet sales, and through a mix of independent distributors and licensees, in approximately 190 countries around the world.
The company focuses its product offerings in seven key categories: Running, Basketball, Football (Soccer), Men's Training, Women's Training, NIKE Sportswear (its sports-inspired products) and Action Sports. It also markets products designed for kids, as well as for other athletic and recreational uses, such as baseball, cricket, golf, lacrosse, outdoor activities, football (American), tennis, volleyball, walking and wrestling.
The firm has been generating economic value for shareholders for the past few years, a track record we view very positively. Return on invested capital (excluding goodwill) has averaged 33.6% during the past three years. Nike has an excellent combination of strong free cash flow generation and low financial leverage.
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- NKE 15-Year Financial Data
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On a Growth Spree
Nike has a high perceived value and is a hit among consumers who are brand conscious and willing to pay a high price for high quality. It has a good brand reputation and is distinctively marked by its slogan, Just Do It. Nike is continuously improving its products, meaning it can rightly be said that innovation plays a key factor in its growth opportunities. Strong research and development, complementing innovation, expansion into trendy/fashion industry where not just athletes are targeted but the general population where new competition can be met from alternative clothing lines, are some the measures the company has taken to sustain its growth.
The next five-year plan can involve a shift in Nike's focus from the traditional division in categories like footwear, equipment, etc., to individual sports, selling of other assortments like sunglasses, hats and other accessories. On the other hand, Nike's strong financial performance will help it to cash in on new innovation with its robust R&D. Apart from the main focus on athletic apparel and footwear, Nike can make further development in casual wear items. Further, Nike can inbuild RFID technology into its supply chain system which will help it in operating more efficiently in the market and also gain six sigma quality standards. There is also an opportunity to tap other market segments like Asian countries where disposable income of people is increasing and they are becoming more brand conscious.
Innovation Plays a Key Role
For an athletic apparel and sporting-goods manufacturer that is as dominant on a global scale as NKE, growth cannot be derived solely from geographic expansion. In fact, one of Nike's greatest strengths, its massive global footprint, has also become part of the reason the company's growth is slowing somewhat.
However, Nike management remains committed to innovating in various product categories. This is extremely important because innovation, which is at the heart of almost everything Nike does, has already driven massive success for the company before. Judging by Nike's most recent and upcoming product introductions, innovation will continue to be a key growth driver in the future as well.
In the recently ended quarter, Nike introduced several new products that showed off the company's innovative capabilities. The first was its new football shoe, the Vapor Carbon Elite Cleat; it was designed via a state-of-the-art 3D design process just in time for the Super Bowl in the New York area. The cleat allows football players greater speed and quicker cuts.
A second innovation was debuted at the 2014 Winter Olympics in Sochi, Russia. Both the men's and women's Canadian ice hockey teams wore Nike's newest jerseys on their way to gold medals. The jerseys were super lightweight thanks to the company's built-in Nike Flywire technology.
Finally, the most recent innovative design for Nike has been its eagerly anticipated Magista soccer boot, which was revealed a few weeks ago ahead of the 2014 FIFA World Cup in Brazil. The boot, which Nike claims will "change the game," was developed with the help of professional soccer athletes; it features revolutionary enhancements like Nike Flyknit, 360-degree rotational traction, and a sock-like fit.
Spring is a Favorable Time for This Brand
The spring season is a busy time for sports in America. As football begins to awaken from its slumber and baseball gets set for its opening day, fans have a lot to be excited about. As it turns out, so do investors. Athletic footwear and apparel giant NIKE’S brand awareness increases dramatically.
Nike remains the official supplier of NFL team uniforms, which are boldly presented on stage every time a player is drafted. Additionally, Nike's huge presence in the sport of basketball is enhanced in the spring, too, as the NBA gets set to begin playoffs in the weeks ahead. Major sponsorship deals with players like Lebron James, Kevin Durant, and even the injured Kobe Bryant mean that Nike's stranglehold on the basketball market should remain unchallenged in the long term and pick up in the spring.
Nike is a global brand and is the No. 1 sports brand in the world. Nike is a very competitive organization and boasts of a very good leadership. Nike sponsors the top athletes and gains valuable coverage through the media. For the last 20 years there has been increased demand for products in the sports clothing market which suggests that Nike will have a profitable investment if it continues business in the same industry. People are spending more on such products. Its market share in the global sports apparel market has historically increased from 3.9% in 2007 to 4.9% in 2012 as its apparel sales grew at a pace above the industry average during the period.
Nike is expected to create value for its shareholders in the near future. Fitness consciousness, rising income levels in developing countries, the growing popularity of sports apparel for women as well as the trend towards stylish and comfortable sportswear are some of the factors that will add to the growth of Nike.