Use access key #2 to skip to page content.
$57.98 -3.16 (-5.17%)
10/7/2008 4:04 PM

Nike, Inc. (NKE)

CAPS Rating:
****

The Company designs, develops and markets footwear, apparel, equipment, and accessory products.

View All Commentary (NKE)

Recs

4

Avatar NetscribeConsGds (96.81) Submitted: 1/03/07 7:31 AM : Outperform Start Price: $47.81 NKE Score: 50.96

NIKE is the undisputed leader in athletic footwear and apparel brand. The company markets its products through a mix of independent distributors and licensees across 160 countries around the world. Nike expanded its operation by acquiring companies like Cole Haan, Bauer, Hurley and Converse.

The $19 billion US athletic sport shoe market is world’s largest, constituting 47% of the total market followed by Europe, which constitutes around 31%. This goes well with Nike, which derives 79% of its revenues from US and Europe. Conversely, the company’s expansion of its retail distribution in China led to a 30% growth in the country’s revenue in 2Q’07. Likewise, the concentration in emerging markets like China holds key to Nike’s success story in the long run, as Chinese footwear market is expected to grow at the rate of 7% annually, and is valued to reach $9.6 billion by the end of 2009. Historically, major sporting events have reaped good fortunes for such companies and the upcoming Beijing 2008 Olympics should drive Nike’s top line.

One of the concerns for Nike is the 15% rise in inventory when compared to a 10% growth in revenue. However, the company should be able to manage its inventory, given the rising demand for its products from emerging markets. Additionally, its recent tax agreement with Dutch government, leading to a reduced tax burden, will come useful to improve its bottom line. With all these positives, the management expects its top-line to witness a stable growth in the year to come, which should influence the investors positively.

Report this Post Replies: 1 | Reply

Avatar NetscribeConsGds (96.81) Submitted: 4/20/07 6:19 AM

Recs: 0 | Rec This

The world athletic footwear and apparel market is highly competitive market with players like Nike and Adidas dominating the market. The battle for supremacy depends upon player’s ability to position its brand, where advertising plays a crucial role. Nike has already increased its advertising spending and brand events during 2007, which has helped the company to enhance its consolidated revenue by 9% for nine months of fiscal 2007. Moreover, Nike’s investment in World Cup 2006 has provided a perfect start for its move to enhance its image internationally.

The increased advertising coupled with strong performance of its running products like Nike has already benefited the company in the form of increase in U.S. market share. Moreover, Nike’s improved product mix and enhanced experience gained by premium consumers have led to acceleration of future orders. The company reported worldwide futures orders for its athletic footwear and apparel, scheduled for delivery from March 2007 through July 2007 to total around $6 billion, an increase of 9% largely driven by contributions from the U.S and Europe.

Nike has already set its long-term revenue growth target of more than 50% to $23 billion by fiscal 2011, buoyed by growth across its brand portfolio. The company also expects to open about 100 new Nike stores worldwide, with half of its stores is expected to open in the U.S. over the next three years. Nike should be able to achieve its fiscal 2011 revenue target with major sporting events like Beijing Olympics 2010 in queue. With all these positive aspects, the company is well poised for an interesting year in 2007.

Report this Post Reply

Featured Broker Partners