Nike Inc. BNKE

Morningstar Rating

Stock Research and Analysis

by R.J. Hottovy, CFA

Nike remains the dominant player in the athletic footwear and apparel category it helped to revolutionize throughout the past 40 years. Industry competition is as fierce as ever, but we expect the firm to maintain its market leadership due to a wide Read more

Bulls Say

As one of the world's most widely-recognized brands, Nike wields significant pricing power. Interbrand rated Nike as the most valuable sporting goods brand during 2009, and the 26th most valuable brand overall.

Nike's footwear and apparel assortment spans several geographies and categories, mitigating exposure to any particular product or market.

Nike has significant power over its suppliers and retail customers. Nike represents more than half of the purchases by Foot Locker FL and Finish Line FINL, collectively.

The firm has consistently returned value to its shareholders through cash dividends and share repurchases, including $1.1 billion returned during fiscal 2009.

Emerging markets should present ample growth opportunities. The firm has established a solid foundation in key markets across Eastern Europe, the Middle East, Africa, China, and Latin America. Read more

Bears Say

The global athletic footwear and apparel market is fiercely competitive and largely stagnant. Even though Nike remains the market leader, it must compete with a larger competitor in adidas following the 2006 acquisition of Reebok.

A prolonged global economic downturn could hurt top- and bottom-line results as cash-strapped consumers shy away from Nike's premium-priced products.

Trade barriers and tariffs on imported footwear in the European Union and Latin America could negatively impact profitability.

Endorsement contracts with athletes and teams lend instant credibility to Nike's products, but also require sizeable cash commitments. Negative publicity resulting from controversial endorser action could adversely impact revenue growth.

Virtually all of Nike's merchandise is sourced from outside the U.S. Any disruption in the company's supply chain could negatively impact operating results. Read more

Strategy

Nike's primary strategic objectives include increased market penetration and expansion into new markets and product categories. The firm targets high-single-digit revenue growth by tapping higher-growth Read more

Management

Mark Parker was named CEO in 2006 following the resignation of William Perez, who clashed with founder and chairman Phil Knight. We think Nike is in good hands with Parker at the helm. A Nike employee for nearly 30 years, most recently serving as co-president Read more

Profile

Nike is the world's largest designer and wholesaler of athletic footwear and apparel. The firm sells to over 50,000 retail accounts, through a network of almost 700 company-owned Read more

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