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Nike Has What It Takes to Overcome Challenges in 2014
Posted by: tyokunbo (IP Logged)
Date: March 25, 2014 05:01PM

As of May 31, 2013, Nike (NKE) had 645 stores. The company engages in the development of athletic products for men, women, and kids worldwide. It offers performance equipment for sports activities. Nike sells its products to footwear stores, sporting goods stores, department stores, and others. It also distributes its products through retail stores, internet websites, and independent distributors. The company was founded in 1964 and is headquartered in Beaverton, Oregon.

Numbers at a Glance

Nike recorded great quarterly earnings. The company increased its third quarter diluted earnings per share by 4%. It increased its third-quarter revenue by 13%. On a currency neutral basis, both Nike and Nike Brand revenues increased by 14%. The company’s gross margin increased 30 basis points. It was impacted by higher average prices and the continued strength of Nike’s businesses.

Positive Outlook

For the 2014 full year, Nike expects its revenue growth at the top end of its high single-digit projections. It expects its gross margin for the next quarter to expand by 50 to 75 basis points. For the full year, Nike expects a gross margin expansion of about 90 basis points. Though the company hasn’t completed its planning for the full-year 2015, it expects to see a continued strong momentum in its business. It expects to see an anticipated currency neutral revenue growth for 2015 at or slightly above the company’s high single-digit target. It expects its EPS growth to be at its mid-teens projections.


In the third quarter, Nike launched an array of innovative footwear and apparel for the NFL’s biggest moment. The company launched its vapor carbon cleat footwear. To accomplish this, it leveraged its 3D printing capabilities. In apparel, it emerged with a collection of training and sportswear products designed to be lightweight.

At the recently concluded Winter Olympics, Nike’s jersey leveraged innovations from across categories in front of a global audience. It developed the Tech Fleece and the Aeroflot Summit Jacket to provide lightweight warmth for sportsmen. Both products have become popular items with consumers.

In the running footwear sector, Nike expanded its breakthrough Flyknit platform. The products were developed to create a lightweight running shoe. In its running apparel sector, it continued to gain a significant proportion of the market share with innovative designs. The company’s running shirts are best sellers because they are high stretch knit and soft. Nike evolved a strategy for women’s running. That strategy is working and the company’s women business grew faster than its men business.

In the run-up to the World Cup, Nike has launched an impressive collection of cutting-edge football products. It developed a boot to help footballers see teammates quickly. It also designed another for a better cooling.

Head to Head

Nike faces a stiff competition from Under Armour (UA) and Adidas (ADDYY). Under Armour has been growing its full-year revenue by 25% per quarter and is starting to compete with Nike in the high-end sportswear market. While Under Armour may be on the rise, Nike has a much stronger international presence. Compared to its other rivals, Nike has a comparative advantage, as its breakthrough products are developed with insights from the world’s best athletes. Consequently, the company’s solutions have become must-have sportswear products for consumers.

International Expansion

Nike does business in more than 190 countries. Though the company’s global reach increases the complexity of its operations, it also presents opportunities. Emerging markets offer significant growth potentials in its business.

A Glance at Mexico

Nike worked with its third party logistic provider to resolve the distribution challenges in the country. It continues to work to clear its excess inventory. The demand for its products remains strong in Mexico.

A Passage to China

It opened a store in Shanghai to sell skateboarding and snowboarding equipment. It also organized events to popularize the store. It aims to increase partnerships with the government to develop school athletic programs and expand clubs at universities. Nike holds classes targeting female consumers in gyms in seven cities. Nike’s China revenues grew 8%.


Nike’s portfolio includes a diverse set of categories. It is well-positioned to survive an ever-changing environment. It continues to invest and innovate in its businesses. Overall, it has a strong financial position. I feel that Nike has what it takes to overcome challenges in 2014.

Stocks Discussed: NKE, ADDY, UA,
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