Nike (NKE, Financial), based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. It is one of the leading athletic apparel and footwear enterprises and has its presence in approximately 190 countries around the world.
Nike is the global leader in the sports shoes and clothing industry. The footwear industry is booming right now, and this company has more room to grow. It is one of the most valuable and well reputed brands in the world.
Results speak
Fourth Quarter:
- Fourth quarter revenues for Nike Inc. increased by 5% and were $7.8 billion.
- Revenues during the fourth quarter for Nike Brand were $7.4 billion.
- Revenues for the Converse brand during the fourth quarter were $435 million.
- Fourth quarter diluted earnings per share were $0.98 (it increased by 26%). This was due to strong revenue growth and gross margin expansion, a lower tax rate and a decrease in the weighted average diluted common shares outstanding.
- Inventories as of May 31, 2015 increased by 10%.
- Effective tax rate decreased to 17.8% (it was 23.5% during the prior year quarter).
- Net income increased by 24% and was $865 million.
- Gross margin was 46.2% (in expanded by 60 bps).
- Selling and administrative expenses were $2.6 billion (it increased by 6%).
- Operating overhead expense increased 13% to $1.8 billion.
- As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from June through November 2015 totaled $13.5 billion, 2% higher than orders reported for the same period last year, and 13% higher on a currency neutral basis.
Share repurchases
During the fourth quarter, NIKE, Inc. repurchased a total of 6.8 million shares for approximately $678 million as part of the four-year, $8.0 billion program approved by the board of directors in September 2012. As of the end of fiscal 2015, a total of 80.9 million shares had been repurchased under this program for approximately $6.0 billion, at an average cost of $73.55 per share.
Fiscal 2015 Results:
- Revenues for Nike Inc. increased by 10% and were $30.6 billion.
- Revenues for Nike brand were $28.7 billion.
- Revenues for Converse were $2.0 billion.
- Gross margin was 46.0% and expanded by 120 bps.
- Selling and administrative expense increased by13% and were $9.9 billion.
- Demand creation expense increased by 6% and was $3.2 billion.
- The effective tax rate decreased to 22.2% (which was 24% for the same period last year).
- Due to strong revenue growth, gross margin expansion and a lower tax rate, net income increased to $3.3 billion (an increase of 22%).
- Diluted earnings per share increased to $3.70 (an increase of 25%).
Focus on women’s business
NKE is currently focusing on expanding its women’s business segment. Amy Montagne has been appointed VP, GM of NIKE Women’s. Montagne will be responsible for expanding NIKE’s brand position with women and continuing to drive the current momentum within NIKE’s women’s business.
“With such an explosion of creativity in sport and a growing lifestyle that seamlessly integrates her run and workout with the rest of her day, Nike has never been better positioned for growth,” says Amy Montagne, VP/GM of Nike Women. “Today we’re introducing the most comprehensive and innovative women’s collection Nike has ever created.”
NKE expects that its women’s business revenue may grow up to $7 billion by 2017. The company garners about $5 billion annually from its women customers. NKE has targeted to push its sales up by 40% in the coming five years.
NKE has already started rolling out women’s stores, the most recent in this league being the one opened in Newport Beach in California. This store has its personal styling and fitting amenities. “The NIKE Brand is expected to deliver nearly $10 billion in incremental revenue by Fiscal 2017, and our apparel, women’s and ecommerce businesses will support this growth,” said Trevor Edwards, president of the NIKE Brand. “Over the last three years, the NIKE Brand has grown close to 40%, and we will continue to innovate and grow by focusing on products and services that capture the imagination of our consumer and help athletes perform at their highest potential.”
Women all over the world are choosing to work out and run with Nike. The Nike+ Training Club App for women has been downloaded 16 million times and 9 million women have downloaded the Nike+ Running App. The Nike+ digital community is a global ecosystem of inspiration and optimism, using knowledge and community to motivate. By offering athletes at every level a better understanding of themselves, Nike serves as the direct link between the female consumer and her goals.
"Sport and fitness are powering a new lifestyle shift for women around the world,” says Mark Parker, president and CEO of NIKE, Inc. “Our relationship with our digital community of 65 million women, coupled with great product innovation, is driving our momentum, and we expect to add another $2 billion in revenue to reach $7 billion by FY17.”
Positive attributes
The company has the following positive attributes attached to it:
- Solid pricing power.
- Continual innovation.
- Investment in research and development.
- It has a robust pipeline.
- It is constantly evolving.
Being in news
Nike replaced Adidas (ADDYY, Financial) as official maker of NBA uniforms in an exclusive eight-year deal in the 2017-18 seasons. “This partnership with Nike represents a new paradigm in the structure of our global merchandising business,” NBA Commissioner Adam Silver said in a statement. “As our exclusive on court apparel provider, Nike will be instrumental in our collective efforts to grow the game globally while applying the latest in technology to the design of our uniforms and on court products.”
“We’re excited to bring the full power of our global reach, innovation and creativity to partner with the NBA and grow the game in a way only Nike can,” Nike President & CEO Mark Parker said in his statement. “In Nike, Jordan and Converse we have three of the most connected brands in the world, and look forward to making the global growth of the game a successful strategy for both the NBA and Nike.”
Nike will pay NBA about $125M a year for an official uniform supplier deal (which is more than double what Adidas was paying).
On a concluding note
Today, Nike continues to seek new and innovative ways to develop superior athletic products, and creative methods to communicate directly with their consumers. NKE is a hit among the brand-conscious consumers, and customers don’t mind paying extra for this brand. It definitely lives up to its slogan, “Just Do It.” Nike’s tremendous financial performance will help the company stay a step ahead of its competitors.
It has already witnessed tremendous success in the North American region. The Asian countries hold tremendous opportunities for this company. With robust innovation, continuing research and development activities, Nike is bound to create shareholder returns.
NKE has always liked being on the top and has diligently worked towards it. Innovation has clearly been a part of its strategy. No wonder NKE is pushing its resources to woo its women customers. It is capturing broader fashion trends in the women’s fashion market.
The incline towards stylish and comfortable clothing, rise in disposable levels of income and a sudden increase in fitness-conscious people will boost the company’s growing popularity. The next few years may see the company shifting its focus towards other stylish accessories like sunglasses, etc. Innovation has always played a key role in Nike’s success.
Working out will never go out of fashion, and women play an integral part in fashion trends. NKE has a good future as regards the women’s business segment. NKE has tremendous growth potential in this area.
(Source: Company's Website)
