Nicole Dupuis and Megan Fahey
Financial Management
Professor Clarke
Stock Performance Project
Due April 9, 2014
Nike Inc.
Nike is noted by many investors and consumers to be the “the world’s largest sporting-goods company” (Townsend 2013 b). It is known for being a leader in it’s industry by employing rigorous marketing, recruiting top athletes, and employing the newest and greatest technology for its products (Swinand 2014). Though Nike faces tough competition against industry rivals such as Adidas, Nike appears to continue to be a mainstay and profitable company in the years to come.
Nike’s lowest price over the last fifty-two weeks was on July 24th 2013 at $59.95 per share. At this time, Nike was experiencing high net income increases (22 per cent) while having difficulty gaining a hold of the Chinese market. Over the course of 2013 Nike has been struggling to meet the proper fit of its clothing and the trends for the Chinese population . Not only has Nike has had trouble with the consumer market in China, but it has also experienced difficulty with higher costs for materials and labor while the Chinese economy continues to slow down in overall growth (Townsend 2013 a, Much 2013). Though Nike experienced difficult in terms of labor, materials cost and trends within the Chinese market, Nike was able raise it’s overall sales by eight per cent through online sales and continuing to be a leader in sports innovation and technology (Townsend 2013 b).
Nike’s highest stock price reached $79.85 last December (“Bloomberg 2013-2014 Stock”). Nike recently has been expanding their product line to include high-end items such as the $160 Flyknit running shoes and the Hypervenom soccer cleats priced at a premium of $225 . These products have helped increase shares (52 per cent in 2013 alone) (Townsend 2013 b). Not only do they have premiums that employ the latest technology, but Nike sponsors top athletes to wear these higher end products.
Nike’s success has largely come from its combination of rigorous marketing, endorsing top athletes, and continuing to be a leader in innovation (Swinand 2014). In regards to competition, Adidas has always been close behind Nike’s lead. Recently, Nike has been revealing new technology in its Magista soccer cleats (a traditional soccer cleat made with Flyknit technology) while Adidas premiered its upcoming Primeknit FS two weeks later. This is just in time for this summer’s upcoming FIFFA torniment. To display its new Magista, Nike has recruited several athletes such as Andres Iniesta of Spain, Mario Gotze of Germany, Thiago Silva of Brazil, and many more. While bolstering sales with top athletes, Nike, who saw sales and orders increase by 18 and 26 per cent in December, is continuing to take more of the market share from the Adidas dominated Europe (Brantley 2014).
According to a chart from Bloomberg comparing Nike and Adidas, Nike has been slowly but surely separating themselves from Adidas since February of this year. Since February, Nike has grown significantly away from Adidas. Previous to this past February, Nike and Adidas prices were increasing and decreasing closely from May 2013 through September 2013 (Bloomberg 2014 b). On the other hand, in comparison to the different market indexes, Nike has been following the fluctuations of the S&P 500 (Standard and Poor’s 500) and NASDAQ closely since May of 2013. Nike has not, however, been significantly close to the fluctuations of the DJIA (Dow Jones Industrial Average) (Marketwatch 2014 b, c, d). This is most likely because the Dow Jones Industrial Average is comprised of 30 stocks that are unrelated to Nike, such stocks include Microsoft and Disney.
Despite their recent successes of 2014, the annual rate of return for Nike has fluctuated significantly from 2008 to 2013. In 2008, Nike suffered a capital loss which resulted in a negative annual return of -19.88%. The next two years, there was about a 30% return. However, in 2011, the annual rate of return was cut more than in half to 13.57%. The capital gain was equal to 12.82% in 2011, compared to nearly 30% capital gains in in 2009 and 2010. In 2012, the annual rate of return plummeted to -46.05%. For the year 2013, the rate of return once again became positive, but this time was much greater than before. It was a 54.09% return with a capital gain of 52.40%. Secondly, for the most recent 52 week period, April 1st, 2013 to April 1st, 2014, the capital gain was equal to 27.60%. The stock price on April 1st, 2013 was $58.26, while one year later it was $74.39. Dividends declared totaled 0.90, and the annual return was 29.23% (Yahoo Finance). According to dividend and earnings per share information from Valueline on April 2, 2014, a current dividend payout ratio is 7.97%. In other words, Nike pays 7.97% of their net income to stockholders in the form of dividends. The price-earnings ratios according to Marketwatch, Yahoo Finance, and Value Line are all around 25. Price-earning ratios are calculated by dividing the market price per share by the earnings per share. Lastly, according to Yahoo Finance, Nike’s Beta is 0.70. Because this Beta is less than one, it means that Nike’s stock price and the market fluctuations are not directly correlated.
Profit margin is equivalent to the profitability a firm has. Nikes pricing power is about 9.82% which indicates that the company is not extremely profitable in terms of the money they make off of their products. For leverage, Nike has an equity multiplier of about 1.58 meaning that about a 10th of the company’s assets are financed by equity. Nike’s asset turnover ratio is about 1.44. Companies with high sales volume often will see higher ratios, therefore Nike is proving that they are doing well in terms of selling high volumes of their products. Finally for return on equity Nike’s is 22.28% which means it is a fairly profitable company in terms the return on the products they sell.
Nike is one of the most widely recognized and commanding brands in the sporting-goods market. With its branding, advertising, and innovation, Nike will continue to be a mainstay in leading the market well into the future (Swinand 2014). Nike’s directional forecast, according to Bloomberg’s Stock Graph for a 1 year period, appears to steadily be increasing steadily as the year progresses (Bloomberg 2014 a). This can be supported by Marketwatch’s 5 year stock prices graph which is steadily increasing to the present day (Marketwatch 2014 a). Nike’s future appears to be strong, with North America and Europe being the major force behind their increasing growth. Nike will focus innovation in running, football, basketball and men’s training to continue to remain the world’s largest sporting-goods company (Team 2014, Townsend 2013 b). Nike will also continue to recruit top athletes such as Lebron James to market their premium products. By incorporating top American basketball players and demonstrating strong performance even in the face of severe weather, Nike will continue to remain a dominant force in North America. In Central and Eastern Europe Nikes sales and future orders rose to 17 and 13 per cent respectively in the second quarter. Nike will continue to focus on this region in the future. As for China, Nike will have to overcome it’s difficulty with customer tastes and trends while incorporating products more suited to Chinese consumers (Team 2014, Much 2013).
References
Bloomberg. (2014). [Interactive graph illustration of Nike stock prices for 2013 to 2014]. Nike Stock Graph Accessed from Bloomberg Stock Charts. Retrieved from http://www.bloomberg.com/quote/NKE:US/chart
Bloomberg. (2014). [Interactive graph illustration of Nike stock prices as compared to Adidas stock prices for 2013 to 2014]. Nike and Adidas Stock Graph Accessed from Bloomberg Stock Charts. Retrieved from http://www.bloomberg.com/quote/NKE:US/chart
Brantley, C. (2014, March 25). Nike’s Future Growth Does Not Hinge on the World Cup. The Motley Fool. Retrieved from http://www.fool.com/investing/general/2014/03/25/nikes-future-growth-does-not-hinge-on-the-world-cu.aspx
Marketwatch. (2014). [Interactive graph illustration of Nike stock prices for a 5 year period until March 16]. Nike Stock Data Access from Marketwatch. Retrieved from http://www.marketwatch.com/investing/stock/NKE/charts?symb=NKE&countrycode=US&time=12&startdate=1%2F4%2F1999&enddate=4%2F8%2F2014&freq=1&compidx=none&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013
Marketwatch. (2014). [Interactive graph illustration of Nike stock prices for the year of 2013 to 2014 as compared to DJIA]. Nike Stock Data Access from Marketwatch. Retrieved from http://www.marketwatch.com/investing/stock/NKE/charts?symb=NKE&countrycode=US&time=8&startdate=1%2F4%2F1999&enddate=4%2F8%2F2014&freq=1&compidx=DJIA&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013
Marketwatch. (2014). [Interactive graph illustration of Nike stock prices for the year of 2013 to 2014 as compared to DJIA]. Nike Stock Data Access from Marketwatch. Retrieved from http://www.marketwatch.com/investing/stock/NKE/charts?symb=NKE&countrycode=US&time=8&startdate=1%2F4%2F1999&enddate=4%2F8%2F2014&freq=1&compidx=NASDAQ&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013
Marketwatch. (2014). [Interactive graph illustration of Nike stock prices for the year of 2013 to 2014 as compared to S&P 500]. Nike Stock Data Access from Marketwatch. Retrieved from http://www.marketwatch.com/investing/stock/NKE/charts?symb=NKE&countrycode=US&time=8&startdate=1%2F4%2F1999&enddate=4%2F8%2F2014&freq=1&compidx=SP500&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013
Marketwatch. (2014). [Stock Overview Table for Nike for March 26, 2014]. Nike Stock Data Overview Access from Marketwatch. Retrieved from http://www.marketwatch.com/investing/stock/NKE?CountryCode=US
Much, M. (2013, June 28). Nike Picks Up Profit Pace But Hits A Wall In China; Q4 Earnings Advance 27%; Athletic shoe giant sees lower Chinese revenue over the next 2 quarters. Investor’s Business Daily. Retrieved from http://www.lexisnexis.com.library.emmanuel.edu:2048/hottopics/lnacademic/?
Nike Historical Stock Prices. (2008-2014). [Online tool to indicate stock prices for Nike from 2008 to 2014]. Nike Historical Price Accessed from Historical Price Lookup. Retrieved from http://investors.nikeinc.com/Investors/Stock-Information/Historical-Price-Lookup/default.aspx
Nike Historical Dividends. (2008-2014). [Online tool to indicate dividend prices for Nike from 2008 to 2014]. Nike Historical Price Accessed from Dividends. Retrieved from http://investors.nikeinc.com/Investors/Stock-Information/Dividends/default.aspx
Nike Inc. Annual Report On Form 10-K. (2013). Selected Financial Data [Data file]. Retrieved from http://investors.nikeinc.com/files/doc_financials/AnnualReports/2013/docs/nike-2013-form-10K.pdf
Swinand, P. (2013) With its suite of competitive strengths, Nike may have turned the corner in China. Morningstar. Retrieved from http://library.morningstar.com.library.emmanuel.edu:2048/Stock/analyst-report?t=NKE®ion=USA&culture=en-US
Team, T. (2014, March 19). NIKE Earnings Preview: Growth in North America and Europe to Drive Nike. Forbes. Retrieved from http://www.forbes.com/sites/greatspeculations/2014/03/19/nike-earnings-preview-growth-in-north-america-and-europe-to-drive-nike/
Townsend, M. (2013, June 29). China’s slump hurts Nike forecast;
Revenue in North America surges 12%, pushing global sales up 7.4% in 4th quarter. The Toronto Star. Retrieved from http://www.lexisnexis.com.library.emmanuel.edu:2048/hottopics/lnacademic/?
Townsend, M. (2013, December 20). Nike profits boosted by higher-priced shoes, online growth; Sporting-goods company jumps on global health trend with premium products. The Toronto Star. Retrieved from http://www.lexisnexis.com.library.emmanuel.edu:2048/hottopics/lnacademic/?
Valueline. (2014). Nike Full Research Report [Data File]. Retrieved from http://www3.valueline.com/dow30/f6403.pdf
Yahoo Finance. (2008-2013). [Online tool to indicate stock prices for Nike from 2008 to 2013]. Yahoo Finance Historical Prices. Retrieved from http://finance.yahoo.com/q/hp?s=NKE&a=11&b=31&c=2008&d=11&e=31&f=2013&g=m
Yahoo Finance. (2013, 2014). [Online tool to indicate dividend prices for Nike from 2013 to 2014]. Yahoo Finance Historical Prices. Retrieved from http://finance.yahoo.com/q/hp?s=NKE&a=03&b=1&c=2013&d=03&e=1&f=2014&g=v
Yahoo Finance. (2014). [Stock Overview Table for Nike for March 26, 2014]. Nike Stock Data Summary Access from Yahoo Finance. Retrieved from http://finance.yahoo.com/q?s=NKE
Nicole Dupuis 