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10 Things to Know About Nike


Nike is a global brand unlike many. Whether we hear the word ‘Nike’ or we see the swoosh, we know it represents excellence in athletic footwear and apparel. Nike is a long time industry leader with iconic brands and labels, Air Force 1s, Jordans, Retro Jordans, Foamposites, Air Max, Cortez to name a few. The company has been great in outpacing the competition in the past, but now Nike faces new challenges. The U.S. retail market is facing tough times, which has impacted Nike as well as others, and the competition that Nike was so good keeping at bay is now gaining market share.

Nike is a big name and it’s trading at what appears to be an attractive price, but before making an investment here are 10 Things to Know.

1. With the NBA season approaching we’ll start off with Nike being the official producer of all NBA team’s uniform. All team jerseys will sport the Nike Swoosh, except the Charlotte Hornets who will sport the Jordan brand logo on their Jersey. Nike reportedly paid $1 Billion for the 8 year deal with the NBA.


2. Nike is finding new ways to mesh fashion and tech with its Nike Connected NBA Jersey. The jerseys are outfitted with an NFC chip. Fans wearing a Connected NBA jersey can access team highlights, news and stats by tapping their phone against the area of the jersey where the NFC chip is located.


3. According to Nike, the Kyrie 3 continues to be the number one selling basketball sneaker.


4. Revenue in North America declined by 3% compared to revenue in the same quarter last year. Nike attributes this to short term promotional headwinds and headwinds within the U.S. retail market.

Source: Nike's 2018 1st Quarter Report

Source: Nike's 2018 1st Quarter Report

5. For the second quarter Nike expects growth to be in the low single digits. Again stating the struggling U.S. retail market will play a part in the slow growth.

6. In the first quarter conference call Nike stated that 55% of their revenue is from international business. The company feels there is a lot of opportunity ahead in their developing markets.

7. Nike states in the last quarter they expanded their sneakers to 19 new markets in Europe, and the performance is outpacing expectations.

8. Nike states that in China revenue grew by double digits in the quarter.

Source: Nike's 2018 1st Quarter Report

9. Nike broke down last quarter's growth as follows

Nike Brand 2% growth

Nike Direct Business 11% growth

Online 19% Growth

New Store and Comparative Stores 5% growth.

10. Nike's P/E is lower than its industry and sector average. However, in Price-to-Sales, Price-to-Cash Flow, and Price-to-Book Nike's numbers are higher than the industry and/or sector. When looking for value, we try to find a company where the P/E, P/S, P/CF, and P/B are lower than the industry and sector.

Source: E-Trade. Graphic: Seville Report

Nike faces some strong headwinds from increased competition, namely Adidas and Under Armour. The U.S. Retail market will also be a hindrance to growth, but it appears Nike is addressing this issue. Nike’s online growth and direct business are growing. Whether it was a point in the past to not compete with the retailers like Foot Locker and Foot Action, consumer shopping habits have left the company no choice. Nike’s online and direct business should compensate for the slowing U.S. retail market and also contribute to the decline of the U.S. retail market.

There are a few things to be excited about as a potential Nike investor and there are some things to be weary of. How Nike adjusts to the slowing U.S. retail market will determine how professional investors see the stock., the Nike App, and the Nike Sneaker app are great moves towards going directly to the customer.

Time will tell if Nike at these levels is a bargain.

#Nike #SevilleReporters #TheSevilleReport #Investments #ValueInvesting

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