NIKE

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Presentation Outline
 Snapshot  Analysts
 Brief Overview Recommendations
 Financial Statements  Risk
 Industry Comparison  Investment
Recommendations
 Current News
 Technical Analysis
 Trend Analysis
 Eval
 Summary of
Valuations
Snapshot
Sector Consumer Cyclical
Industry Footwear
Market Cap. 21.738 billion
Ticker Symbol NKE
Recent Stock Price $84.11
52wk High $92.43
52wk Low $75.10
Beta .83
Brief Overview
 NIKE’s principal business activity is the design, development and
worldwide marketing of high quality footwear, apparel, equipment,
and accessory product
 The largest seller of athletic footwear and athletic apparel in the
world
 Distributed in over 160 countries around the world
 Sell under the NIKE brand, wholly owned subsidiary Converse,
Cole Haan, g Series, Bragano, Hurley, NIKE Hockey, and Exeter
brands
 Main competitors have joined with the recent announced
acquisition of Reebok by Adidas
Overview
 Nike’s best year was last year.
 The US accounts for 46% of revenues.
 Market Cap doubled in 1 year, mostly due to
the growth in US footwear sales.
 Internet market share makes buying shoes
easy.
 No such thing as bad publicity.
Financial Statements
 Sales growth has consistently grown over the last four years
– 4.3% in 02’ 8.1% in 03’ 14.5% in 04’ 12.1% in 05’
 Increase in Gross Margin from 39%-45%, however this is not
likely to continue to grow in future years
 Red Flags…
Industry Comparison
Ratio NKE Industry Sector S&P500

P/E 17.09 17.33 17.38 19.63

Beta .64 2.31 1.12 1

Price to Sales 1.61 1.49 1.21 2.76

Current Ratio 1.92 4.07 2.91 1.71

ROA 15.25 14.55 7.45 7.62

ROI 19.98 19.07 9.95 11.46

ROE 24.04 22.71 14.3 18.96

Receivable Turnover 6.26 7.33 6.60 10.39

Inventory Turnover 4.44 4.49 8.53 13.02

Current News
 England just banned the use of a chemical that is used in
the production of leather shoes. The affects on NIKE have
yet to be determined.
 Adidas announce its acquisition of Reebok. These are the
two biggest competitors, who when combined, will be
roughly the size of NIKE.
Technical Analysis
In the last Year…
• Support level 76 dollars per share
• Resistance level approximately
92 dollars a share

Last 5 years…
• Support level at 39 dollars a
share
 Technical Analysis Continued…
• In line with its 200
day moving average

• Has tended to less volatility

over the last 2-3 years
Trend Analysis
Inventory Trends
Leverage Analysis
Operating Cash Flow
Revenue Breakdown
NIKE, Inc.
DIVISIONAL REVENUES
Q1 05 Q2 05 Q3 05 Q4 05 YTD FY 05 Q1 06 YTD FY 06 1 Year Quarterly Growth

U.S. Region

Footwear 921.4 680.0 849.6 907.2 24.4% 1,021.1 26.4% 10.8%

Apparel 391.3 384.7 345.8 335.9 10.6% 395.5 10.2% 1.1%
Equipment 89.0 67.3 72.8 84.3 2.3% 92.3 2.4% 3.7%
Total 1,401.7 1,132.0 1,268.2 1,327.4 37.3% 1,508.9 39.1% 7.6%

EMEA Region

Footwear 663.3 531.8 615.3 689.6 18.2% 685.1 17.7% 3.3%

Apparel 409.7 370.0 351.3 366.1 10.9% 435.2 11.3% 6.2%
Equipment 84.9 59.3 67.3 73.0 2.1% 97.2 2.5% 14.5%
Total 1,157.9 961.1 1,033.9 1,128.7 31.2% 1,217.5 31.5% 5.1%

Asia Pacific Region

Footwear 218.6 236.6 237.9 269.8 7.0% 237.4 6.1% 8.6%

Apparel 148.8 207.8 188.3 210.6 5.5% 176.5 4.6% 18.6%
Equipment 38.6 39.1 46.6 54.6 1.3% 45.7 1.2% 18.4%
Total 406.0 483.5 472.8 535.0 13.8% 459.6 11.9% 13.2%

Americas Region

Footwear 114.8 129.8 99.6 134.4 3.5% 156.9 4.1% 36.7%

Apparel 35.5 46.9 33.5 53.2 1.2% 40.7 1.1% 14.6%
Equipment 11.4 12.6 10.6 13.5 0.4% 16.1 0.4% 41.2%
Total 161.7 189.3 143.7 201.1 5.1% 213.7 5.5% 32.2%

3,127.3 2,765.9 2,918.6 3,192.2 87.4% 3,399.7 88.0% 8.7%

Other 434.5 382.4 389.6 529.2 12.6% 462.3 12.0% 6.4%

Total NIKE, Inc. revenues

3,561.8 3,148.3 3,308.2 3,721.4 100.0% 3,862.0 100.0% 8.4%
EVal
Summary of Valuations

Analysts Recommendations
 Analysts have a price target between 95-110 dollars
depending on one or two year return
 Consensus recommendation is OUTPERFORM
 Mean rating is a 1.84, down from a 2.06 two months
ago
NIKE Risk
 Risk Grade – 103 (Max 134)
 Over 3/4 of all stocks available are more risky than NIKE
Risk Cont’d
Portfolio with NIKE
 Risk Grade of 60 vs. current risk grade of 62
 An analysis of our current portfolio labels consumer
discretionary as the most underweight sector
compared to the benchmark
 Interesting Facts:
– Nike NEVER made an offer to buy Under Armor
– They had Nike Shocks well before they were sold
in store but decided to hold sale until Michael
Jordon retired and his shoe line lost popularity
Investment Recommendations
 Positive: Company has strong potential if it can tap into the
foreign markets (China and International Soccer). A purchase
of 65 shares would account for 4.65% of the portfolio and would
have a market value 5,382 dollars.
 Negative:
– Right now too much stress is put on the strength and growth of the
US Footwear sector.
– The abroad sector that is expected to grow contributes a low
percentage of overall revenue. However, this does leave room for
rapid growth and expansion.
– The company has doubled its market cap. over the last five years
and has seen a very wide trading range between 50 and 90 dollars.