Business is picking up nicely for Nike (NYSE:NKE), the world’s largest manufacturer of athletic footwear, apparel and equipment by sales. Nike competes with the likes of Adidas (ADDYY), Puma (ETR:PUM) and Reebok.
Reporting earnings for the first quarter of the company’s 2011 fiscal year, management noted rising demand across all geographies except for Japan and Western Europe. Overall orders were up by 10% compared to the same period a year ago, driven by strong demand in North America, greater China and emerging markets.[1] Based on these trends we have increased the Trefis stock price estimate for Nike from $67.82 to $68.63. Our analysis follows below.
Market share forecast
We expect Nike’s share of its two primary markets, footwear and apparel, to remain flat in the calendar year 2010. This reflects weaker sales in early 2010. Going forward, we expect rising demand to boost Nike’s share of both markets. You can drag the trend-line in the chart below to create your own footwear market share forecast for Nike and see how it impacts the company’s stock.
Behind the numbers
Nike is seeing particularly strong demand for performance-focused footwear and apparel. In the most recent quarter, for example, Nike’s LunarGlide running shoes posted the highest quarterly sales of any shoe in company history.
Direct-to-consumer sales are also growing fast. Nike’s own stores delivered record revenues for the quarter, while online sales rose by 22%.[2] The company plans to boost its investment in the direct-to-consumer business, which should yield continued fast growth in this sales channel.
Finally, Nike has continued to spend on demand creation, leveraging major sporting events like World Cup Soccer and promoting its own World Basketball Festival for the first time. Nike uses these events to showcase new products, thus boosting future orders.
You can see the complete $68.63 Trefis price estimate for Nike’s stock here.
[1] Taken from Nike’s SEC filings
[2] Taken from Nike’s Q1 FY2011 earnings transcript
