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Nike Is One of the Best Picks of 2014

June 09, 2014 | About:
Suravi Thacker

Suravi Thacker

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Consumer spending has been increasing in the U.S., which means retailers can sell more since customers are willing to spend. In fact, consumer spending increased by 0.9% in March, higher than that of February. Therefore, footwear retailers too are expected to benefit, footwear retailer Nike (NKE) likely being one of them. After earnings beat in each quarter over the last one year, Nike once again showed its power to stir customer demand when it reported its last quarter results some time back.

Nike’s top line surged 13% over last year, clocking in at $7 billion. Nike’s strength lies in product innovation, which attracts customers, resulting in higher sales. Also, its bottom line increased 4% to $0.76 per share. This growth was driven by higher selling prices and lower costs, resulting in expansion of gross margins.

A Few Hiccups

However, Nike faces stiff competition from other players such as Adidas (ADDYY) and Under Armour (UA). In the global sporting goods market, Nike commands 14.6% and Adidas has a share of 11.4%. Also, both the players will be competing in the FIFA World Cup 2014 as each of them has taken a number of initiatives to outpace the other. Similar to Nike, Adidas has also been pretty active on the innovation front. In addition to NBA’s short sleeved jerseys, Adidas has introduced many new products such as Springblades and Energy Boost, which use new technology to deliver more comfort to runners.

Under Armour, too, has been making new innovations such as ColdGear infrared technology, Charged Cotton, and Storm, which drove its revenue 26% higher in the last quarter. However, Under Armour derives most of its revenue from apparel sales, with women’s apparel being one of the key drivers.

Under Armour’s efforts in new products, new designs for its apparels and expansion in the international markets have been quite helpful in its growth. Moreover, the retailer plans to expand its business, especially women’s apparel, by aggressively spending on marketing its new products. Therefore, it will be interesting to see how these players will fare in the future with each one trying to outpace the other.

The Future

Nike has been a very active player with new strategic moves each time. In fact, it is doing it yet again. It plans to introduce two new sports wear lines in Shanghai in the coming months. The sneakers are colorful and are expected to bring in customers to its stores. Also, Nike launched the new Arsenal Shirt with a patchwork of the older jerseys, which makes it look even more attractive.

These new products along with increased marketing efforts should lead to higher demand. Also, the upcoming sports events should help boost Nike’s revenue.

Finally

Although Nike faces stiff competition from other players in the industry, it is one of the leading players. It has been a consistent performer, which was once again proved by its third quarter results. Moreover, its innovation measures should further boost its revenue. Additionally, sports events such as the World Cup will help Nike leave a mark in the minds of customers. Prudent investors should take note of this growing footwear company.


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