NIKE (NKE) Last Update 10/21/21
Related: AEO ANF TPR GPS
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
NIKE
$164.16
Yours
Trefis Price
N/A
$164
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

NIKE Company

VALUATION HIGHLIGHTS

  1. Nike Brand Footwear constitutes 66% of the Trefis price estimate for NIKE's stock.
  2. Nike Brand Apparel constitutes 26% of the Trefis price estimate for NIKE's stock.

WHAT HAS CHANGED?

Nike Tops Fiscal Q4 Estimates

  • Nike’s fiscal fourth-quarter earnings and sales were fueled by record revenue in its largest market, North America - revenue was up 141% on a reported basis compared to last year and was 29% higher than the tally in 2019. North America's digital growth continued to be strong, rising 54% vs. 2020 and 177% vs. 2019. Overall digital sales were up 41% compared with the prior year, and rose 147% compared with the same period in 2019.
  • Total revenue rose to $12.34 billion from $6.31 billion a year earlier, topping estimates for $11.01 billion. Sales were aided by the company selling more goods at full price and relying less on markdowns. Nike also saw a boost to its wholesale business — something that was largely inactive a year earlier during the Covid pandemic.

Company Guidance

In fiscal 2022, Nike is expecting revenue to grow a low double-digit percentage, surpassing $50 billion. Analysts were looking for annual revenue of $48.5 billion. The company anticipates the first half of the year to grow faster than the second half. Nike also anticipates supply chain delays and higher logistics costs persisting throughout much of fiscal 2022. The headaches have been plaguing much of the retail industry for months now. A shortage of containers and a dearth of truck drivers, among other factors, have stalled merchandise from getting from ports to warehouses to shoppers’ homes.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Nike's value that present opportunities for upside or downside to the current Trefis price estimate for Nike:

  • Nike Footwear Revenues: Nike Footwear Revenues have consistently grown over the years and stood at $28 billion by the end of Fiscal 2021. This can be attributed to strong marketing spend and innovation to enhance the product line. Trefis expects this figure to increase to $35.4 billion over the forecast period. If this metric increases to $40 billion by the end of our forecast period, there could be a 10% upside to the Trefis estimate. On the other hand, if it increases to only $30 billion, it represents a 10% downside to the Trefis estimate for Nike.
  • Nike Brand Footwear Gross Profit Margin: Nike Brand Footwear Gross Profit Margin remained relatively flat from 44% in 2013 to 43.4% in 2021. Trefis expects this figure to increase to around 46% over the forecast period. In case the gross margin increases to 50% by the end of the Trefis forecast period, there can be a 5% upside to our price estimate for Nike's stock. On the other hand, if it declines to below 40%, there could be an 8% downside to the Trefis price estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Nike at the top of the page.

BUSINESS SUMMARY

Nike Inc. is the largest manufacturer of athletic footwear, apparel, and equipment worldwide, by sales, with close to $42.3 billion in revenues in FY 2021. The company sells its products under several brands, which include Nike, Nike Golf, Converse, Hurley, etc. It typically outsources the manufacturing of its products to Asia and focuses on innovation and designing of products. Previously, Nike offered its products through two new brands - Cole Haan and Umbro. It later sold these two brands as they were not complementing Nike's brand image.

SOURCES OF VALUE

The primary sources of Nike's value are footwear and apparel sold under the Nike brand, and together they contribute about 90% of Nike's value. Nike Brand Footwear is more valuable than Nike Brand Apparel and Converse Brand Footwear for the following reasons:

Nike Footwear is more valuable than Nike Apparel

Nike's footwear revenues stood at $28 billion in FY 2021, more than double that of its apparel revenues which were around $13 billion. As the economy improves in the U.S. and Europe, and demand increases in China and emerging markets, we expect footwear revenues to continue to rise. With aggressive marketing and innovation, Nike branded footwear has been able to capture a significant chunk of the global sports footwear market

KEY TRENDS

Nike is expanding its own stores which provide higher margins

In the footwear business, producers and distributors jointly earn a profit per shoe of about 12%, while retailers earn a profit of 13%. By selling through its own retail stores, Nike is able to capture both margins. The total number of company-owned stores for Nike has increased from about 486 at the end of the fiscal year 2007 to around 1100 stores at the end of 2020. Just by looking at the numbers, one can see how much Nike is focused on growing its DTC networks and increasing sales in the stream.

Furthermore, it has recently opened a new 55,000 sq ft store in New York's prime Soho area that offers customers a unique and immersive shopping experience. Another such store is expected to open on Fifth Ave.

Demand for low-performance athletic wear is increasing

In the last few years, demand for low-performance footwear in the U.S. and Europe has grown significantly. Low-performance footwear refers to footwear that is not intended for athletic use. In this segment, Nike faces competition from low-cost manufacturers that are trying to establish a foothold in the U.S. and other international markets. Nike has gradually increased its focus on selling low-performance footwear through its Converse and Hurley brands. However, the brand is facing stiff competition from competitors like Adidas that threaten to level the playing field.

High growth potential in China and emerging markets

With the rapidly growing economies of China and other emerging markets such as Brazil, these regions have emerged as key markets for Nike. The company is experiencing strong growth in virtually every one of its business segments in these regions, and the trend is expected to carry forward. China, in particular, is leading the charge with immense growth coming in from the region at a time when demand in North America is shrinking marginally.

Growth of digital platform

NIKE Digital has achieved impressive growth over the few quarters. Both the SNKRs app - which sells limited-edition shoes using collaborations with athletes, celebrities, and universities - and the newly launched NIKE app are resonating strongly with consumers. For the year, NIKE Direct drove the majority of Nike's incremental revenue growth, with Nike Direct constituting approximately 32% of the company’s total revenues in FY 2021. This share is expected to go up to 40% in 2021, with mobile contributing more than 50% of Digital commerce revenue. We expect growth momentum in Nike Digital to continue with increasing digitization and Nike’s increasing investment in order to expand its digital ecosystem.