Nike’s Analysis

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Table of Contents

Executive Summary:........................................................................................................................3

Introduction:....................................................................................................................................4

Company Background & Current Stage in Growth Lifecycle.........................................................5

Detailed Financial Information – Microeconomics.........................................................................7

Industry Landscape, Trends and Competitors – Macroeconomics................................................12

Recent Developments, Analyst Opinions and opportunities:........................................................13

Recommendations:........................................................................................................................16

Conclusion:....................................................................................................................................17
Executive Summary:

Nike is a company that mainly works in the footwear market. Sports clothing, accessories,

equipment, and component items are planned, manufactured, and commercialized. CEO Philip

Knight is overseeing Nike, Inc. President. Mr. Knight was co-founded in 1962, and in 1978 Nike

was formally named.

The company's financial records, press releases, division details, company history, and current

ventures were compiled for a strategic audit of Nike Inc. and its wholly-owned subsidiaries.

Following the compilation of data, an analysis of the capabilities, limitations, opportunities, and

risks Nike has as an organization was done and a SWOT analysis was conducted for Nike. In

Porter's Five Powers model, the footwear industry was studied. Based on the results, Nike Inc. is

recommended as follows: Strengthening the reputation of quality and brand of ACG;

successfully using the money by extending promotions in the entertainment field; growing the

marketing initiative in casual footwear lines; continuing to be at the cutting edge in designing

and producing athletic footwear; maximizing the quality of Nike Inc.’s products

"To ensure the inter-generational quality of life, preserving the atmosphere, and increasing

respect to our customers, shareholders and business partners, by embracing business strategies,

Nike has set a mission statement" (1). According to Acaria.com, the mission is to increase

income for shareholders through goods and services that enrich the lives of our clients.
Introduction:

Nike from Oregon (NKE) is one of the world's biggest labels. The organization is still strong

since it was founded in 1964 as Blue Ribbon Sports. Nike is the leading retailer of sports clothes

and boots. Recognized for his famous motto —"Just Do It" It also creates makes and

commercializes its own sports equipment range. Nike's corporate names include Air Jordan, Nike

Golf, and Nike Pro, as well as several franchises including Converse and Hurley International.

Nike Inc. (NKE) is a multinational business designing, producing, promoting, and distributing

sporting equipment, clothes, accessories, and services. Though mainly for sporting use, many of

their products are used for recreational or recreational uses. Manufactured by private contractor

firms, the bulk of Nike products are either distributed directly to the customer by Nike retail

stores and on digital platforms or through local manufacturers, licensees, and sales members.

The company's headquarters in Oregon include Adidas AG (ADDYY), ASICS Corp. (7936),

Lulu lemon Athletica Inc. (LULU), Puma SE (PUMSY), and Under Armore Inc. (UAA) Nike is

the largest growth organization in terms of mindset and purpose. I am sure the owners will be

happy if Nike works by the slogan and pursues the momentum. By February 2020, the firm had

$143.6 billion in market capitalization. Based on its stable stock output and income growth,

sales, and income per share, good balance sheet, and management strategy, Nike is a solid stock.

Yet no risk-free stock remains – not even Nike. In China, a recession, currency fluctuations and

intensified competition are issues often that can form the growth figures in the sector. Although

the positive should prevail over the negative ones, the stock might seem to be costly especially

when it is about 52 weeks old. The business can clarify this level, but it is prudent to encourage it

to take a breath before selecting this sporting stock.

Company Background & Current Stage in Growth Lifecycle

Nike, Inc.'s primary business is "designing, developing and marketing of high-quality shoes,

clothing, equipment, and accessories worldwide". In the USA and about 110 countries around

the world, Nike sells its goods to about 20,000 retail accounts. Almost all Nike products are

manufactured by independent contractors. The bulk of footwear items are made outside the US.

Revenues of $8.8 billion were compared to a record of $9.6 billion for the fiscal year ended on

May 31, 1999.

Nike footwear has been specially designed for athletic use. High-quality construction and

creative nature are of great significance. But a significant proportion of the items are used for

recreational or informal purposes. Nike offers and sells a wide range of items such as track

shoes, soccer, cross fitness, women, and youth. These are all now its top-selling types of items.

Nike markets also offshore shoes for outdoor events, for example, tennis, cricket, soccer,

baseball, rugby, bicycle, volley, boxing, boarding, water sports, car racing, and other leisure or

sports activities (Samuelson, 2010).

Nike started to market outdoor sports clothing in 1979 and now we are offering clothing and

athletic bags and shoes in both of these categories. Nike clothes and shoes have the same brands

and are marketed through the same promotion and delivery outlets, to add to your sports

footwear products. In "collections" with identical styles or for particular reasons the company

also markets boots, garments, and accessories. The brand offers a range of Nike-based

performance apparel, including athletic balls, timepieces, eyewear, skates, bats, and other sports

equipment. They offer also, through its wholly-owned subsidiary, Cole Haan Holdings, an

assortment of casual footwear and accessories for men, women, and children under the brand

name Cole Haan. The business markets its wholly-owned subsidiary, Nike Team Sports, Inc.,
formerly Sports Specialties Corporation, with its official team logos. They also sell limited

quantities of different plastics through its wholly-owned company, Nike IHM, Inc., to other

manners.

Ice skating, rollerblades, in-line skates, safety clothing, hockey sticks, and hockey jerseys and

accessories are manufactured and sold under the corporate names of Bauer and Nike through

Bauer, the company's wholly-owned subsidiary, Bauer Nike Hockey Inc. Bauer provides a wide

range of lane, roller and field hockey items, too.

In the world of athletic, recreation, and footwear brands, products and equipment companies, and

major companies, including Reebok, Adidas, and others, Nike is competing with growing

numbers of sporting and leisure shoe companies and globally diverse lines of sports and

equipment.

Growth; The business called itself a "growth enterprise," a clear statement about its mindset and

purpose. I am sure the owners will be happy if Nike works by the slogan and pursues the

momentum. As of February 20, the corporation has had $143.6 billion in market capitalization.

For Nike, things went well. The 2019 fiscal year finished with sales of $39.1 billion. This was 7

percent more than last year and revenues were 36.4 billion dollars. On a balanced monetary

basis, the growth was 11 percent relative to the previous fiscal year.

Hurley and Converse are the main brands of Nike's affiliate. Converse crafts produce and sell

clothes, boots, and accessories for sport. On the other side, Hurley crafts markets and distributes

boots, clothes, and apparel for surfing and kids. Business shifts into the direct sale of the brand

and high US growth have driven Converse's sales to $1.9 billion, up by 3 percent from the

previous year's comparison.

Detailed Financial Information – Microeconomics

Item/Year 2019 2018 2017 2016

Current Assets 16,525,000 15,134,000 16,061,000 15,025,000

Current 7,866,000 6,040,000 5,474,000 5,358,000

Liabilities

Inventories 5,622,000 5,261,000 5,055,000 4,838,000

Cash 4,663,000 5,245,000 6,179,000 5,457,000

Receivables 4,272,000 3,498,000 3,677,000 3,241,000

Total Assets 23,717,000 22,536,000 23,259,000 21,396,000

Total Liabilities 14,677,000 12,724,000 10,852,000 9,138,000

Total Equity 9,040,000 9,812,000 12,407,000 12,258,000

Sales 39,117,000 36,397,000 34,350,000 32,376,000

Cost of Goods 21,643,000 20,441,000 19,038,000 17,405,000

Sold

EBIT 4,772,000 4,445,000 4,749,000 4,502,000

Interest -49,000 -54,000 -59,000 -19,000

Net Income 4,029,000 1,933,000 4,240,000 3,760,000

During Q1 of its 2021 fiscal year (FY), which ended August 31, 2020, Nike reported net profits

of $1.5 billion on $10.6 billion in sales. In Q1 FY 2021, net income rose 11.0 percent relative to

the same quarter a year before. Compared to the year-ago period, sales declined by 0.6 percent.3

Reduced operating and administration costs offset the reduction in gross profit and revenue,

helping to improve net profits.

Nike noted that, due to the effects of COVID-19 and safety-related initiatives, it continues to

witness decreases in physical retail traffic in its stores. For the quarter, most of the company's

stores were open. The organization has also said that its digital revenues have seen good growth.

Moving on to the liquidity ratios;

  May 31, May 31, May 31, May 31, May 31, May 31,

2020 2019 2018 2017 2016 2015

Current ratio 2.48 2.10 2.51 2.93 2.80 2.52
Quick ratio 1.39 1.14 1.45 1.80 1.62 1.47
Cash ratio 1.06 0.59 0.87 1.13 1.02 0.94

Current ratio: a liquidity ratio based on the current assets over liabilities. The existing ratio of

Nike Inc. decreased between 2018 and 2019 but then changed to a 2018 average between 2019

and 2020.

Quick ratio: liquidity ratio measured as a selective range of Current A. (cash plus short-term

marketable assets plus debts) divided by present liabilities. The quick ratio of Nike Inc. worsened

between 2018 -2019, and then increased between the periods of 2019 -2020, however still could

not reach 2018's benchmark.

Cash ratio: A ratio measured as (cash + current marketable securities) divided over by current

liabilities. The cash ratio of Nike Inc. declined from 2018 - 2019 but then strengthened over 2018

from 2019 to 2020.

  May 31, May 31, May 31, May 31, May 31, May 31,

2020 2019 2018 2017 2016 2015

Debt Ratios

Debt to equity 1.20 0.38 0.39 0.31 0.17 0.10

Debt to assets 0.31 0.15 0.17 0.16 0.10 0.06
Financial leverage 3.89 2.62 2.30 1.87 1.75 1.70
Coverage Ratios

Interest coverage 20.12 37.65 35.88 57.81 150.13 124.68

Fixed charge 5.01 6.00 5.58 6.98 7.68 7.70

coverage

Debt-to-equity ratio: solvency ratio measured as net debt divided by total shareholder equity.

Nike Inc.'s debt-to-equity ratio increased from 2018 to 2019, but only declined drastically from

2019 to 2020.

debt-to-asset ratio: solvency ratio measured as net debt divided by total assets. Nike Inc.'s debt-

to-asset ratio increased from 2018 to 2019, but only declined drastically from 2019 to 2020

(Brigham, & Houston, 2015).

Financial debt ratio: solvency ratio measured as net assets divided by total shareholder interest.

The financial leverage ratio of Nike Inc. rose from 2018 to 2019 and from 2019 to 2020.

Interest coverage ratio: solvency ratio measured as EBIT broke down by interest payments. The

interest coverage ratio of Nike Inc. increased from 2018 to 2019, but then declined substantially

from 2019 to 2020.

Fixed coverage ratio Solvency ratio measured as earnings before fixed charges and tax split by

fixed charges. The fixed charge coverage ratio of Nike Inc. increased from 2018 to 2019 but then

declined dramatically from 2019 to 2020.

  May 31, May 31, May 31, May 31, May 31, May 31,

2020 2019 2018 2017 2016 2015

Return on Sales

Gross profit margin 43.42% 44.67% 43.84% 44.58% 46.24% 45.97%

Operating profit 8.33% 12.20% 12.21% 13.83% 13.91% 13.64%

margin
Net profit margin 6.79% 10.30% 5.31% 12.34% 11.61% 10.70%
Return on Investment

Return on equity 31.52% 44.57% 19.70% 34.17% 30.67% 25.76%

(ROE)
Return on assets 8.10% 16.99% 8.58% 18.23% 17.57% 15.15%

(ROA)

Gross profit margin: Gross profit margin reflects the amount of income required for operating

and other expenses. The gross profit margin ratio of Nike Inc. increased from 2018 to 2019 but

then declined dramatically from 2019 to 2020 (Van Horne, & Wachowicz, 2005).

Operating profit margin: profitability ratio measured as operating profits divided by income. The

gross profit margin ratio of Nike Inc. fell from 2018 to 2019 and from 2019 to 2020.

Net profit margin: Measure of performance, measured as net profits divided by income. The net

profit margin ratio of Nike Inc. increased from 2018 to 2019, but then fell marginally from 2019

to 2020 to 2018.
ROE: The profitability ratio is measured as the net profits divided by the equity of the lenders.

The ROE of Nike Inc. improved from 2018 to 2019 but then fell significantly from 2019 to 2020

to 2018.

ROA: The rate of profitability measured as net profits divided by total assets. The ROA of Nike

Inc. changed from 2018 to 2019 but then declined dramatically from 2019 to 2020.

The dividend yield is a simple way to calculate the present interest rate received on the

invested dollar because it is a relative measure of common stock dividends. The dividend yield is

measured as follows: annual dividends earned per share / current stock market price. The

dividend yield for Nike Inc. is 1.16. It is commonly one of the ratios that are tested by skilled

traders to watch rates and it provides a clear understanding of how the business operates. It is

useful to look at the dividend payout ratio to put the dividend yield in perspective. The part of

earnings per share that is paid out as dividends is determined by this ratio. Dividends per

stock/earnings per stock are calculated as follows. The payout ratio for Nike Inc. is 22.22

percent. This is a fairly decent ratio, and while stockholders like to collect dividends, they do not

like to see the payout ratio of the company above 60-70%. It is hard to sustain payout rates that

are so high and will bring the organization into trouble.

The latest stock price of Nike Inc. was priced at $41.38, and with each share kept, their last

annual dividends were valued at $0.48. It is fair to assume that its dividend distribution per year

is reasonably effective.

Considering Nike Inc. is a leading high-quality footwear manufacturer, producer, and marketer,

one would expect their business profile to be very good. The previous financial review indicates

that even though their ratios might not always be above market expectations, Nike runs a stable
sector in the industry. Keeping the shareholders happy is always really critical, and Nike has

done this by constantly bringing value to the brand. Nike deserves praise for being an industry

leader and for still being on the lookout for new markets to lead, amid some low ratios.

The outlook of Nike looks highly optimistic as the company expects new markets to begin to

enter, boost revenue, and mitigate product costs. It is therefore possible to expect the company to

continue paying dividends, which guarantees a positive return on shareholders. In conclusion, we

will advocate investing in the stock of Nike Inc. as this study shows that it will be a smart

investment and would provide any investor with exciting opportunities.

Nike is an affluent portfolio, focused on constant stock success and earnings growth per share,

profits, and net revenue. Yet no risk-free stock remains — not even Nike. A recession in China,

the movement of currency, and rising competition are often issues that could diminish the

development of the business. While the positive can outweigh the negatives, the stock will seem

costly, especially if it is about 52 weeks tall. The business can justify these prices, but you should

let it take a moment to buy up this sport stock. It would be smart.

Industry Landscape, Trends, and Competitors – Macroeconomics

Many firms fight for revenue. The market is very fierce. Most money is spent on advertisement

and promotion on multiple platforms so that the young age community of customers can connect

with them, investing most money on their goods. In the athletic footwear industry, development

has also slowed, but with fast growth rates, new markets are developing. The action sports and

corporate products markets are examples of these markets. The seasonal portion of commodity

demand is also influenced by rivalry.

Companies in other sectors seek to win consumers over to their replacements. As sports and

casual wear are rising unconventionally, competition and marketing are fierce in moving

consumers around. Consumer prices are still very competitive for swapping. Alternatives are

conveniently available, attractively priced, and equal to quality, with just a few characteristics.

The athletic footwear industry is dissuasive as a result of the research and development of the

athletic footwear market. Casual shoes are however not as pricey. Technological knowledge in

sports footwear is not readily available (ex. Nike Air, Nike Shox, Reebok DMX, etc.). Buyers

are still very involved in brand loyalty and choice. To do so, brand awareness, advertisements,

endorsements, etc. must be created, all of which can be very costly.

Another problem facing potential entrants is the limited investment in manufacturing resources.

Restricted access to retail space is however one of the most significant entrance deterrents. No

regulatory policies, tariffs, or import barriers are currently being enforced to prohibit entry.

Suppliers have little control or control to manipulate pricing or availability. Raw materials and

processing capability are also not missing. Quality and efficiency in the processing and

production of raw materials is not a consideration because it's an expensive process. Quality and

efficiency depend on the type and manufacture of the shoe, not on the raw materials concerned.

Control and leverage tradable by commodity purchasers, The fact that switching costs are low

gives buyers some control. However, there is a very big number of prospective clients who buy

themselves and not as a group. Thus, volume or exclusive party discounts are not negotiated.

Buyers may not attempt to reverse their inclusion in the sellers' market. However, consumers

may determine whether to procure a specific brand of a product in a broad variety of ways.
Recent Developments, Analyst Opinions, and opportunities:

Nike is a major developer of revolutionary new goods. It began with Nike Air's air product

range. The new update, the Nike Shox line, has now passed away. The new shoe would increase

the potential of a competitor to leap, fly, and make the game more challenging. For 16 years, the

research team at Nike spent dreaming about the ability to attach the springs to the foot of an

athlete, studying, designing, and testing them. The dream is brought to life by Nike Shox, the

most famous technical creation. This is another example of how Nike is making its sneakers with

performance and technology. They also retain simplistic templates, which for Nike is chic. Nike

is well known for its advertisements as well as its sneakers and has excellent mass-

merchandising and exclusive ads.

In the course of the Customer Direct Acceleration program (CDA), Nike announced some senior

leadership changes at the end of July. To build long-term growth and stability, the CDA

initiative, first revealed in June, intends to accelerate the digital transformation. The company

expects improvements to management to lead to the Company's net employee cuts, leading to

one-time pre-tax exit costs of about $200 million to $250 million.

Nike has precious tangible properties, too. The shoes are sold around the world and they market

shoes in more than 100 countries. Nike also partners with Hewlett-Packard to provide the Nike

supply chain (NSC) initiative with hardware, applications, and consultancy services. The

project's mission is to develop a consumer-driven supply chain and a decision-making process

that will deliver sustainable strategic advantages and strengthen Nike's global brand leadership.

The project aims to increase Nike's capacity to adapt to changing markets, and the investment

cost and inventory, strengthen customer/consume experience, improve procedures, educate and
consistency of the product and provide a local implementation of an effective global supply

chain.

Nike also has important human properties, as their workers are inspired by an athletic

background that makes them an attractive, successful organization. Nike has valuable corporate

strengths, a healthy balance sheet, and a stable financial standing from the point of view of loyal

customers.

Their intangible properties, including brand value or corporate ethos, are one of Nike's most

significant sustainable strategic advantages. Everybody understands that Nike is one with

competitiveness, athletics, and a fair-track mentality from his previous ads, commercial

approvals, and activities. Another power is the R&D organization of the firm, which will

maintain the pipeline full of creative new goods. They still have manufacturing contracts with

producers in countries with fewer labor conditions and other countries with more expense. The

produce is often carried out when labor is inexpensive, as the operation is intensive in function.

Owing to the success of Nike in the last ten years, it is in a favorable business position. Their

market share leadership, wider product range, and greater awareness will also add to this.

Nike broke into three groups of financial measures: NIKE Brand; Converse; and Corporate.

Also, the NIKE brand is split into several regional areas: North America, Europe, the Middle

East, and Africa, Greater China, Asia Pacific, and Latin America and Worldwide Brand

Branches. The division of the NIKE brand constitutes 94.6% of overall sales of the company and

94.6% of total EBIT of the enterprise.

For its primary product categories and distribution platforms, Nike still divides sales but does not

benefit. For instance: Clothing (68.7percent); Garments (27.3percent); Machinery (3.6percent);

and Other revenue created from each of the production lines. Other firms, which include the

income from multinational brands and converse company licensing companies and the foreign

exchange hedge profits and losses paid for in the corporate division, are responsible for a

marginal amount. In Q1 FY 2021, only Footwear produced higher sales than in the first quarter

of 2021. The details listed in the above and below pie charts exclude divisions which have either

negative income or negative income. Nike records both sales and EBIT, its prime metric for the

assessment of financial results for its regional market segments.

 North America: 15.9 billion dollars or 42% of overall profits

 Europe, Middle East, Africa: 9.8 billion dollars or 26% of global revenues.

 Greater China: 6.2 billion dollars or 17% of overall profits

 Latin America: USD 5.2 billion or 14% of overall sales the Asia Pacific

Nike has new prospects and sectors to enter and exploit to remain a global leader and maintain

profits and growth. The highest is the product line "All Conditions Gear" (ACG), which focuses

on the Y generation and the extreme sports they love. More products and accessories are also

important to further broaden into a mainstream sport, such as golf, basketball, basketball,

volleyball, football, and rugby. Nike would now build on existing global markets and enter new

markets. They need to continue to evolve innovations and fads like Nike Shox. Another potential

is to extend promotion into non-sport and leisure venues as the line between entertainment and

sport has blurred. Nike could also attempt to reach into the field of corporate commodities since

this segment is between $3 and $4 billion.

Recommendations:

We also established the following suggestions after evaluating extensively Nike's organization,

marketing policies, and role in the industry. As the consistency and brand value of the ACG

product line is decreasing, we recommend they invest more capital, energy, and advertising to try

and increase it. You can also do this by enhancing product architecture, components, and

processes. The corporation should spend its capital more efficiently. This may be achieved by

broadening its promotion to cover leisure and other non-sport services so the line between sports

is fluctuating. At present, Nike concentrates much of its marketing activities on athletic apparel.

They should also extend their casual footwear to boost sales (Besanko, Dranove, Shanley, &

Schaefer, 2009).

As Nike's approach is to distinguish, they must stay at the forefront of athletic apparel. This will

allow them to develop new sneakers and other items, which will give them a diverse selection of

products. The use of the Internet to communicate with consumers is one of the most important

aspects of Nike's business (Chandr, 2011). They develop a new technology that enables them to

design their shoes online. To do so you must upgrade your website so that it becomes easy to

access. The download on the website takes way too long and there is no word on the simple

functionality of the products. We also advise Nike to expand its international efforts to maximize

its product sales. Our last recommendation is that Nike remains the leader in athletic shoe

technology and performance. They must maintain their strong competitive edge to avoid losing

this position in the first place.

Conclusion:

Investors should be mindful of the financial and stock effects of Nike including currency

volatility, customer preferences, geopolitical tension, emerging technologies, and workers.

However, analysts believe that Nike is positioned for continuous progress, which could influence

the share price of the firm. This is because it relies constantly on creativity in product and

marketing. It will continue to upgrade its digital presence across its Nike Direct enterprise by

marketing and releasing new goods online and also enhancing its supply chain.

Nike's emphasis on market awareness and development through investment can continue to pay

off along with R&D investments and demand generation. Also, demand for its goods could

continue to rise both for the rising middle class in developing markets and for China in greater

numbers. However, there might be some hiccups. In October 2019, the company revealed it was

turning over the reins to John Donohoe to its CEO Mark Parker, who has lead Nike since 2006.

Donohoe served as Chairman and CEO of the cloud computing firm ServiceNow and was on the

Board of Directors of Nike.

China is another main investor aspect that needs to be kept in mind. Since it is one of the major

growth markets of the business, any adverse news from outside the nation can have a huge effect

on stock prices. For example, the inventory hit after the company revealed that, because of the

coronavirus epidemic, it had to close down half its stores in February 2020.
References

Chandra, P. (2011). Financial management. Tata McGraw-Hill Education.

Van Horne, J. C., & Wachowicz, J. M. (2005). Fundamentals of financial management. Pearson

Education.

Brigham, E. F., & Houston, J. F. (2015). Fundamentals of financial management. Nelson

Education.

Samuelson, P. A. (2010). Economics. Tata McGraw-Hill Education.

Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2009). Economics of strategy. John

Wiley & Sons.