NIKE - Stocks

NIKE
Min Spread *
80
Target Spread *
80
Leverage/Margin
1:5
Commission
0
Swap point Long/Short
-1.56 / -1.56
Nominal Value of one lot
100
Trading hours
16:30 - 23:00

Instrument description

Nike is an American global brand known as the largest producer and supplier of athletic footwear and apparel. Nike is a big organization involved in designing, testing, producing, marketing, and selling a wide assortment of footwear, sports goods and accessories, apparel, and equipment.

In 2014, Nike was worth $19 billion, making it the world’s most valuable business company in the sports sector at that time. In 2017, Nike was valued at $29.6 billion and ranked 89 in 2018 in the Fortune 500 list of biggest US firms based on total revenue.

Nike is one of the most popular and successful brands not in the sports category but also generally, and the company is quite popular due to its iconic logo, which is a Swoosh sign. Nike’s logo means ‘Just Do It,’ and it is one of the most recognizable logos and trademarks in the world. The word ‘Nike’ comes from Greek mythology and means ‘Symbol of Victory.’

Nike is headquarters in Beaverton, Oregon, USA, and it has 1096 stores worldwide, and it operates 338 retail stores in the USA. Nike has a total of 75,400 employees. Nike is the leading supplier of athletic shoes and sports apparel. Nike’s most significant store is located on Oxford Street in London and has an area of 42,000 square feet.

Nike is known for its big marketing campaigns, where famous sports and celebrity athletes endorse the Nike brand. The Nike tagline ‘Just Do It’ was picked by the Advertising Age as one of the best advertising slogans in the 20th century. Nike has made award-winning commercials in 2000 and 2002, and the company has also won an Emmy award.

History of Nike

Nike was founded on January 25, 1964, by Bill Bowerman, who was a coach at the University of Oregon athletics and Philip H. Knight, who was an athlete. Phil Knight founded the sneaker distribution by the name of ‘Blue Ribbon Sport (BRS)’ in 1962. Phil Knight met a Japanese shoemaker named ‘Onitsuka Tiger,’ and an agreement was reached to distribute the Tiger Japanese shoes in the US.

In 1964, BRS became a partnership between Bowerman and Knight, and the sales reached 1,300 pairs in the first year. In 1966, the first retail store was opened, and sales reached $20,000. The partnership between BRS and Onitsuka Tiger came to an end in 1971, and BRS started to sell its own line of footwear, which was distributed by the name of ‘Nike.’ The important part of Nike’s history came when the company in 1971 adopted the iconic ‘Swoosh’ logo, which was designed by Carolyn Davidson and cost a mere $35. The Swoosh logo debuted in the 1972 Munich Olympics, which portrayed the image of Nike on a global scale. The Swoosh logo was trademarked on January 22, 1974.

In 1978, Nike changed its name to Nike Inc. In 1979, Nike entered the clothing segment, and the Nike Air cushioning device is launched for the first time. By 1980, Nike had attained 50% of market share in the athletic shoe market in the US. Nike held its initial public offering (IPO) ON December 12, 1980, and started trading publicly at $23 per share.

In 1981, Nike International Ltd. It is formed to develop and push overseas sales of footwear and clothes under the Nike brand. In 1985, Nike signed Basketball champion and popular sportsman Michael Jordan to promote new footwear, which was also named ‘Air Jordan.’ In 1988, Nike acquired another famous brand, ‘Cole Haan,’ which also made clothes and shoes. Also, in 1988, Nike introduced its famous tagline, ‘Just Do It,’ which was presented by Dan Wieden.

In 1990, Nike opened its NikeTown retail outlet in Portland, Oregon. In 1991, Nike reached $3 billion in revenue. In 1994, Nike acquired Canstar Sports Inc., which was later renamed as Bauer Nike Hockey Inc, and the company made authentic hockey equipment and skates. In 1995, Nike signed Tiger Woods with a 20-year contract, which was valued at $40 million.

Nike formed its equipment division in 1996. Nike started digital sales in 1999, where products were delivered directly to the customers. In 2003, Nike acquired ‘Converse’ which was its competitor in a deal worth $39 million. In 2007, Nike acquired another rival brand named ‘Starter. In 2008, Nike bought another sports brand, ‘Umbro,’ which was based in England.

In the late 2000s, Nike started to reorganize its structure and divest some of its subsidiaries. Nike sold Starter in 2007 and Bauer in 2008. Umbro was sold in 2012, and Cole Haan was divested in 2013. As of now, Nike only owns Converse Inc.

Nike stock has split 7 times which are

  • 2 for 1 on January 7, 1983.
  • 2 for 1 on October 8, 1990
  • 2 for 1 on October 31, 1995
  • 2 for 1 on October 24, 1996
  • 2 for 1 on April 3, 1997
  • 2 for 1 on December 26, 2012
  • 2 for 1 on December 24, 2015

Nike has been paying its shareholders a generous amount since 1984, and the payouts have increased gradually from 2004. Nike’s stock has always been profitable for investors, and the company seeks to provide high growth and steady earnings through its stock.

Current Business and Investment of Nike

Nike is a giant in consumer goods and excels in designing, manufacturing, marketing, and distribution of a wide range of footwear, apparel, accessories, and sporting equipment. Nike operates in segments that are categorized according to geographic locations such as North America, Central and Eastern Europe, Western Europe, Greater China, Japan and Emerging Markets.

The portfolio of brands includes Nike brand, Converse, Hurley, and Jordan Brand. Since 2016, the Nike brand is focused on 9 specific categories that are

  1. Football (Soccer)
  2. Jordan Brand
  3. Nike Basketball
  4. Running
  5. Men’s training
  6. Women’s training
  7. Sportswear (Lifestyle products and accessories)
  8. Action Sports
  9. Golf

Nike also designs and develops footwear for kids and certain other sports such as tennis, cricket, wrestling, volleyball, lacrosse, and casual walking and outdoor activity.

Nike is known to sign exclusive sponsorship deals and contracts with all the famous sports celebrities from numerous sports that increase the brand image and worth all over the world. Some of the sponsorship that Nike has done over the years and continue to do so are

  • On uniform of all NFL teams
  • Football teams that include Manchester City, Paris Saint Germain (PSG), and Barcelona
  • Sports Celebrities that include Roger Federer, Tiger Woods, Rafael Nadal, Cristiano Ronaldo, Kobe Bryant, and LeBron James.

Risk and Potential in Nike Environment

Nike posted revenue of $39.12 billion in 2019 with a 36% decrease due to closure of physical stores in the US, and EMEA regions due to the Coronavirus pandemic. The revenues constituted sales of footwear, apparel, and other merchandise. The earnings of Nike came to $2.49 per share, and profit was $4.03 billion in 2019.

SWOT Analysis is a tried and tested strategic management tool that allows business companies to examine their business performance and implement plans for future growth and progress. The SWOT analysis of Nike is given by

  • Strengths

Nike has a dominant position and name in sports footwear and apparel all over the world. Nike has been named among the most valuable companies by Fortune many times. The company has always provided customers with innovation and premium quality in every segment, particularly sports footwear and clothing. Among all other business companies, Nike holds a significant position when it comes to advertising and signing popular sports personalities as brand ambassadors. Nike has more than 1000 exclusive retail stores in the US and in over 180 countries. The company works on the ‘Make to Stock’ principle, which ensures fast and quality service. There is low manufacturing cost as most of the Nike shoes are made in countries where labor and production are cheap such as Vietnam, China, and Indonesia.

  • Weaknesses

Nike heavily depends on the footwear segment for a major source of revenue, and revenue is also mainly generated from the US market, where the competition is growing. The retail segment is price sensitive, and Nike generates most of the revenue by selling to retailers. The company has to face allegations and criticism for poor working conditions and labor laws.

  • Opportunities

Nike can increase its brand worth and revenue by introducing new product lines and increasing business in emerging markets where there is a growing population wanting to buy premium quality footwear and apparel. Nike can open its own sports academy and nurture upcoming talent in various sports. The wearable market is expanding quickly, and Nike can integrate its sportswear with technology that can help athletes to monitor their physical activities. Nike can also develop quality sports sunglasses and other fashionable accessories for the youth.

  • Threats

Nike sells its products all across the world, and the profit margins and cost is affected by the currency fluctuations. The shoes and clothing segment is very competitive, and rivals of Nike include Adidas, Puma, Fila, Reebok, Under Armour, Umbro, Woodland, and Bata. The business of Nike in many global countries is impacted due to fake and low-quality replicas. Rival brands such as Adidas and Puma spend more on marketing, which puts pressure on Nike to increase its marketing budget.

Stock Analysis of Nike

Nike is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘NKE.’ The company is listed under the ‘Consumer Non-Durables’ Sector, and the industry is ‘Apparel/Footwear.’ Nike is also a member of other indices such as the Dow Jones Industrial Average (DJIA), S&P-100 Index, and S&P-500 Index.

The all-time high share price of Nike was $109.75 on August 21, 2020, and the average price in the last 52 weeks is $93.73.

Nike’s fiscal year ended on May 31, 2020, and the fourth quarter financial results showed revenue of $10.2 billion. The positive fourth-quarter results were possible due to an almost 75% increase in digital sales. But the retail sales declined in the US and all over the world due to the closure of stores caused by Coronavirus pandemic.

The fiscal year financials reported by Nike showed revenue of 37.4 billion, operating income of 3.12 billion, net income of $2.54 billion, and total assets worth $31.34 billion. The Covid-19 outbreak has resulted in the closure of stores and increasing the inventory, which has led Nike to improve sales by providing a quality digital platform to its valued customers. The businesses all over the world are resuming, and nearly 90% of Nike’s stores are opened again, and sales are starting to pick up.

In economic uncertainty amid Coronavirus pandemic, Nike seeks to optimize supply and demand, do effective cost management, and to use its resources to achieve long term sustainable growth. In the fourth quarter, Nike has done significant efforts to continue employee payments and providing $25 million to help communities that are affected the most by Coronavirus.

The Coronavirus has led to the closure of businesses and lockdown and the looming threat of global recession, but Nike sales and earnings have been impressive among all the disruptions. The strategy of Nike to involve consumers through interactive online apps has paid off and led to increased purchasing. Digital sales have increased by 75% and accounting for 30% of revenue. Nike stock value also witnessed its highest price recently when the share price was $109.75 on August 21, 2020. Analysts expect that Nike’s earnings will further increase by 26% in 2022. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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