Nike (NKE) has always been an extraordinary performer in the footwear space. The company’s amazing products and great moves have been some of the key drivers of its success. It has managed to overcome various pressures of rising input costs, increased competition and restricted consumer spending, especially in the U.S.
The retailer did it once again when it reported its fourth quarter results recently. The numbers beat the analysts’ expectations, as done in the previous quarters, enabling its share prices to rise.
Great performance...yet again
Driven by higher demand for its product revenue jumped 11% to $7.43 billion, surpassing the estimate of $7.34 billion. The rise in sales was helped by demand for both apparel and footwear in North America as well as Europe. In fact, revenue from all the geographic regions grew remarkably, adding to the top line.
The FIFA World Cup was one of the primary drivers of Nike’s performance. The retailer took advantage of the popularity of the World Cup event in order to promote its products, resulting in a higher top line. Nike has made outfits for 10 teams in the event and introduced 4 new soccer shoes just before the tournament. This resulted in a number of athletes wearing Nike’s soccer shoes than any other brand.
Also, Nike’s endorsement deals with players such as Michael Jordan, Lebron James, Kevin Durant and Kobe Bryant helped in attracting more and more customers. A total of 10 sponsorship deals was signed by Nike whereas Adidas (ADDYY), one of the toughest competitors, signed a total of three only.
The footwear retailer also ramped up its marketing efforts in order to make a larger impact on customers’ minds. This led to higher marketing costs. Still, the company managed to register a 5% increase in its bottom line, clocking in at $0.78 per share, higher than the expectation of $0.75 per share. Further, margins expanded to 45.6% from 43.9% last year, as higher prices and healthy product mix more than offset the increase in costs.
Two lucrative categories for Nike is basketball and running segments, which are growing well and has huge potential. The footwear retailer strengthened these categories by adding more products and newer technologies to these categories. These include Flyknit, Lunar, Nike Free and Dri-Fit. These products have resonated well with customers as they want more of it. The success of these products in these two categories should continue to boost Nike’s revenue in future.
Further, Foot Locker (FL) is one of leading footwear providers and is posting great results. It reported a sales gain of 14% in its latest quarterly results, which shows that it is witnessing higher demand for its products. Moreover, Foot Locker’s most of the products sold belong to Nike. Nike makes two-third of the total revenue of Foot Locker, highlighting its popularity among customers.
Also, Nike declared that its future deliveries increased 11% over last year. This means that the company expects 11% more sales in the next quarter.
Nike is a marvelous performer and is being able to snatch away market share from Adidas, one of the leading players in the soccer category. It has also backed Neymar, a Brazilian star. Hence, the success of Brazil in the World Cup should bring windfall gains to Nike. Further, Nike looks even better with the new partnerships, ramped up promotions, higher future orders and growing demand for its new technologies. Therefore, this company should help you turn your portfolio around.