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Nike is Poised to Grow

August 13, 2014 | About:

Nike (NYSE:NKE) deals in athletic apparel and footwear worldwide. The company has its presence in approximately 190 countries around the world. The Oregon-based athletic apparel giant 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.

Performance so far

NIKE has announced an increase to its fiscal 2015 revenue target to a new range of $28-30 billion, up from its previous target of $27 billion announced in May 2010. The company also increased its fiscal 2015 revenue target for the NIKE Brand to $24-25 billion, up from its previous target of $23 billion.

Revenues for Converse were $410 million, up 15 percent on a currency neutral basis, mainly driven by strong performance in the company’s largest direct distribution markets: the United States, China and the United Kingdom. Revenues for this company rose 11% to 7.4 billion recently. Gross margin expanded to 45.6%. The growth resulted due to higher average selling prices.

Demand creation expense increased by 36% to $876 million. Effective tax rate stood at 23.5%. Western Europe influenced the rise in orders. Future orders in this area increased by 25%. It made shares repurchase program worth $912 million.The China region saw signs of recovery as sales reached $702 million (up by 4%). Nike spent $56.4 million on TV commercials until the end of June.

Revenue from continuing operations was $27.8 billion for the full fiscal year 2014. North America remained strong. This was the most profitable region as EBIT rose faster at 14% than reported revenues of 10%. Nike has managed to tap this market and is in a better position than its competitors. Revenues in Western Europe grew at a pace of 18%.

On a Growth Spree

The momentum gained by the company surrounding the World Cup will help the company to grow forward throughout 2015. 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. Nike introduced a football shoe (Vapor Carbon Elite Cleat). This means greater speeds for the football players.

Another addition was Nike Magista. This launch ensured improved touch, rotational traction and sock-like fit.

Reports were doing the rounds that Nike is in talks with Manchester United and a sponsorship deal could be on its way.

“The NIKE Brand is expected to deliver nearly $10 billion in incremental revenue by Fiscal 2017 and our apparel, women’s, and e-commerce 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 percent 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.”

The company expects its emerging markets geography to grow at a mid-teens average annual growth rate and for Greater China to return to growth, reaching an average low double-digit rate of annual growth for fiscal year 2014 through fiscal 2017.

On a concluding note

NIKE is the world’s leading innovator in athletic footwear, apparel, equipment and accessories. Nike is known for generating shareholder returns for the past few years. Just as Nike’s products have evolved, so has Nike’s approach to marketing. “Secret Tournament” incorporated advertising, the Internet, public relations, retail and consumer events to create excitement for Nike’s soccer products and athletes in a way no single ad could ever achieve. This new integrated approach has become the cornerstone for Nike marketing and communications.

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.

The Asian countries hold tremendous opportunities for this company. With robust innovation, continuing research and development activities Nike is bound to create shareholder returns.

Rating: 3.0/5 (1 vote)



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