Fundamental Analysis of Nike

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Nike is a company globally recognized for designing, developing, and marketing athletic footwear; apparel, sports equipment and accessories for men, women, and children. Nike sells its products all over the world through the retail stores, its own stores, and subsidiary distributors. It was humble at first, but later became one of the world's most famous and appreciated sportswear brands. Currently, Nike has a bullish stock performance compared to industrial averages. It has promoted an impressive growth in terms of the total earnings on shares, its total year revenue, net income, strong balance sheet, and has, in addition, a concrete management system.

Nike pays out cash dividends to its investors and stakeholders on the quarterly basis. It has greatly increased its dividends for thirteen consecutive years, hence putting it in a position to achieve an S&P 500 dividends index. It has met most of the set requirements to be included in the S&P 500 index, which includes increased earnings and acquirement of the blue-chip status. Due to Nike's increasing cash flow, it has been able to solidify its future for dividends and to maintain a consistent rise of 20-30 percent in its dividends' payout. Since, it has been poised as an S&P dividend aristocrat (Steven Nickolas). Considering the revenue growth over the period, one may say that the company is set to increase the dividend for the period in focus.

 

Nike is the best globally recognized brand with regards to the sportswear, according to the first quarter report on brand recognition in the U.S. The products are used in many parts of the world for both competitive and non-competitive sporting activities. In the year 2012, the Nike Company announced an 8 billion dollars share buyback program. The board of directors has approved that directive. The buyback program has since proven to be successful as witnessed by the raised earnings per share. Nike, through the aforementioned program, has been able to repurchase shares amounting to 6 billion dollars by the end of the 2015financial year. This repurchase translates to leaving the company with smaller amount for investment into the business, therefore decreasing the number of outstanding shares. This program is set to expire in 2016 with current information, which indicates that the termination is underway.

The company has developed a direct to consumers (DTC) strategy that helps to reduce the charges of intermediaries and distributors, hence boost margins and revenue of the company. Thus, the consumers are able to access the services and equipment needed direct from the Nike producer. They have also increased the number of direct-to-consumers stores, ensuring that consumers have easy access, and that they are able to reach out to the latter. Nike has also developed a strategy for increasing its online sales and focusing more on brand recognition and growth through the investments, as its first quarter report in 2016 indicates. This has been implemented with the help of the ongoing research aimed at achieving ways and means, through which consumers' needs are fulfilled effectively, and in the most comfortable and accessible way.

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However, just like any other business, Nike is encountering the competition challenges from other companies in the sportswear, accessories, and equipment that could affect its growth. Nike has performed the actions aimed at boosting its consumers' population and demand in countries, such as China, by leaving the retail dealers with very low and quit disappointing sales. The company is diverting the inventories to other markets that have shown signs of making high sales or sales that at least meet the Nike's expectations. Nonetheless, the strengths of Nike can be observed in various ways such as its revenue growth and solid financial position. These strengths, indicated in the balance sheet, poised Nike to have reasonable debt levels. Other major success factors over the period in focus include commendable return on equity, bullish trend on stock performance, and remarkable record of earnings per share growth (Amanda Albright).

Over the years, Nike has acquired several apparel and footwear corporations, some of which have since been divested. Having subsidiary companies improves the efficiency of the company, since there is the division of labor and thus, customers' orders are met. Currently, the company has only two subsidiaries and these include the Converse and Hurley. Converse designs, develops, markets, and distributes surf and athletic lifestyle footwear, apparel, and accessories; while Hurley designs, develops, markets, and distributes youth lifestyle footwear, apparel, and accessories. Over the three months, the two subsidiaries have been reported to be the major source of the company's growth in revenues.

At the event in New York, Nike tossed its latest products. These include auto-tightening sneakers and a revamped fitness application, which will be used by athletes to provide personal trainings. The auto-tightening shoes have been designed so that once a person wears them, they tighten and can be easily adjusted with buttons. This will ensure maximum comfort and increase demand of the product that will, in return, increase the benefits to the company in terms of revenue and a consistent rise in the stock movement. According to the Chief Executive Officer of Nike Inc. Mark Parker, the company aims at being more personal and giving athletes a simple experience but at the same time the one that will enhance the connection between the athletes and the company.

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The company has embarked on ways to improve customization of its products and develop mobile applications that will intensify the direct communication between the company and its customers. This will increase the efficiency and effectiveness of the services and goods provided by the company, and boost the customers' faith and confidence in it as well as create a good customer-company relationship. The use of the applications will ensure that the company gets the direct feedback on the perception of the product in the market. Nike will thus find it easy to adjust and create products with wide acceptability in the market, and these able to satisfy the customers' needs.

In 2003, Phil Knight, who was the Chief executive officer, did not choose Parker for the top seat and brought an outsider, William Perez from S.C. Johnson. It was a move that many people greatly misread, and he was interpreted as a snub. However, Parker was not disappointed as he was actually part of the team vetting the CEO candidates. Knight made the decision and justified it by saying that he thought it was time the company got an outside look. Knight who had been the CEO of the company for almost forty years explained that the company had always worked around his judgments and ideas for so long that it did not realize the drawbacks of the ideas since they were already so used to them, that they could not recognize the mistakes made.

The company's price of earnings ratios has maintained a consistent rise since 2013 and continued over the last three months. It has a market capitalization of around $102 billion and a trailing 12- month sales of over $31 billion. The sales performance is higher than its 52-week range of $45 to $68. It is globally dominant and has a higher customer population in the athletic apparel industry in North America, where it enjoys the largest market shares, compared to other competing companies such as Adidas. It has made significant efforts in repairing the public perception and opinions on issues about its labor practices in the emerging markets. It has greatly invested in marketing its products, where most of its products use the Nike name.

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In conclusion, Nike's goal is to increase its annual revenues to $ 50 billion by the year 2020. The company has formulated strategies to help it to achieve this goal, which includes significantly increasing its direct sales and e-commerce revenues in the developed countries. In order to achieve this, the company has invested into the research in order to develop mobile applications suitable for its customers and has increased the number of direct-to-consumer stores. Observing the last three months, Nike has also increased its distribution of stocks in countries that have recorded a high sale of its products by redirecting the inventories from the countries that record a low sale of the Nike's products.

The Nike Company has also put in place strategies that will ensure that its products are suitable for both genders by developing customized products mainly focused on women. The production of unisex products is among the current development strategies. It is the greatest in the industry, hence stands at a high risk of greater losses in case of any inconvenience. Thus, Nike has to make sure that it has consistent innovations that will enable its growth projections to continue increasing aggressively. The company is set to continue dominating in the athletic and youth lifestyle industry (Strider).

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