Nike financial analysis


Published on

nike fanancial and corporation analysis for 2010

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Nike financial analysis

  1. 1.
  2. 2. CONTENTES<br />
  3. 3. INTRODUCTION<br /><ul><li>Type: Public (NYSE: NKE) in NASDAQ market
  4. 4. Founded : January 25, 1962 as Blue Ribbon Sports 1978 as Nike, Inc.
  5. 5. Founders :WilliamJ. "Bill" Bowerman Philip H. Knight
  6. 6. NIKE Headquarters: Washington County, Oregon, United States (Near Beaver ton, Oregon)
  7. 7. Area served: Global
  8. 8. Key people :Philip H. Knight (Chairman) Mark Parker (CEO &President) </li></li></ul><li>INTRODUCTION<br /><ul><li>Employees: 32800 (2009), 35000(2010) ,
  9. 9. Subsidiaries: Cole Haan,Hurley International, Converse Inc. and Umbro.
  10. 10. Industry :Sportswear, Sports Equipment, Athletic shoes ,Apparel ,Sports equipment Accessories
  11. 11. Website: </li></li></ul><li>Nike History Timeline <br /><ul><li>1962: Phillip Knight, Stanford University, Blue Ribbon Sports
  12. 12. 1964: William Bowerman becomes a partner by matching Knight's investment of $500.
  13. 13. 1965: Hires a full time employee, and annual sales reach $2,000.
  14. 14. 1966: Blue Ribbon Sports, also known as BRS, rents its first retail space; employees can now stop selling shoes from their cars.
  15. 15. 1969: It now has several stores and 20 employees; sales are close to $300,000. </li></li></ul><li> Nike History Timeline <br /><ul><li>1971: Nike, capitalizing on the Greek goddess of victory. The first Nike product sold with the new symbol is a soccer shoe.
  16. 16. 1970 ± 1975: Steve Prefontaine was turned to the University of Oregon by Bill Bowerman and wore Nike products
  17. 17. 1976: The popularity of jogging increases revenue to $14 million.
  18. 18. 1978: The company changes its name to Nike.
  19. 19. 1980: Nike goes public, offering 2 million shares of stock.</li></li></ul><li> Nike History Timeline <br /><ul><li>1990: Nike files suit against competitors for copying the patented designs of its shoes, and also engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes.
  20. 20. 1997: Feb., Stocks reaches a high of $76 per share.
  21. 21. 1998: Sept., Stocks tumbles to $31 per share
  22. 22. 2000: The National Football League declines to renew its exclusive apparel licensing arrangement with Nike. </li></li></ul><li>Nike History Timeline <br /><ul><li>2001: Nike opens its first Nike Goddess store, a unit targeting women, in Newport Beach, CA.
  23. 23. 2003: Nike purchases Converse Inc. for $ 305 million.
  24. 24. 2008 :Nike acquired sports apparel supplier Umbro,
  25. 25. 2009: Air Jordan Shoe
  26. 26. 2010: Nike Future Sole Design Competition</li></li></ul><li>Evolution of the Logo<br />
  27. 27. FINANCIAL ANALYSIS<br />ACCOUNTING POLICIES<br /><ul><li>Management Estimates</li></ul>The preparation of financial statements in conformity with generally accepted accounting principles <br /><ul><li>Recognition of Revenues</li></ul>Wholesale revenues are recognized when title passes and the risks and rewards of ownership have passed to the customer, based on the terms of sale.<br /><ul><li>Shipping and Handling Costs</li></ul>Shipping and handling costs are expensed as incurred and included in cost of sales.<br /><ul><li>Advertising and Promotion</li></ul>Advertising production costs are expensed the first time the advertisement is run. Media (TV and print) placement costs are expensed in the month the advertising appears.<br />
  28. 28. FINANCIAL ANALYSIS<br /><ul><li>Cash and Equivalents</li></ul>Cash and equivalents represent cash and short−term, highly liquid investments with maturities of three months or less at date of purchase.<br /><ul><li>Inventory Valuation</li></ul>Inventories are stated at lower of cost or market and valued on a first−in, first−out (“FIFO”) or moving average cost basis.<br /><ul><li>Property, Plant and Equipment and Depreciation</li></ul>Property, plant and equipment are recorded at cost. Depreciation for financial reporting purposes is determined on a straight−line basis. <br />
  29. 29. FINANCIAL STATEMENTS<br />.<br />
  31. 31. FINANCIAL ANALYSIS<br />
  32. 32. FINANCIAL ANALYSIS<br />
  33. 33. FINANCIAL ANALYSIS<br />
  34. 34. FINANCIAL ANALYSIS<br />
  35. 35. FINANCIAL ANALYSIS<br />
  36. 36. STOCK HISTORY<br />
  37. 37. RATIO ANALYSIS<br />
  38. 38.
  39. 39. INDUSTRY ANALYSIS<br />Sportswear, and sports accessories & footwear industries<br /><ul><li>Since the 2003 athletic footwear industry has begun to enter the high-cost, high-growth "double high" development mode.
  40. 40. In 2010, the United States athletic apparel market become the world’s largest Sportswear market.</li></li></ul><li> Competition<br />ADIDAS AG: 2009 revenues - $13.8<br /> billion. It competes in the overall<br /> sporting goods market. <br />PUMA: 2009 revenue - $3.3 billion.<br /> Puma AG is a Germany-based <br />competitor in the sells sports footwear, apparel, accessories, and equipment.<br />UNDER ARMOUR: 2009 revenue - $856.4 million. Its products, which are designed with microfibers intended to wick away perspiration, extend across the sporting goods, outdoor, and active lifestyle markets.<br />In addition to Nike's footwear competitors, the company also competes with other makers of outdoor apparel, such as V.F. Corporation, Columbia Sportswear and Quicksilver<br />
  41. 41. Competition<br />
  42. 42. PESTEL ANALYSIS<br />
  43. 43. PESTEL ANALYSIS<br />
  44. 44. PESTEL ANALYSIS<br />
  45. 45. Porter’s 5 forces<br />Potential Entrants (LOW)<br />Barriers to entry in the athletic footwear industry are high due to several factors:<br /><ul><li>It is as very capital intensive industry
  46. 46. Economies of scale
  47. 47. The industry itself is in a consolidation phase and only the big ones will survive. </li></ul>Buyers (Very High) <br /><ul><li>Customers more affected by price
  48. 48. There has been and increase in women purchasing the shoes
  49. 49. The buyers for this industry are retailers and end users. </li></li></ul><li>Porter’s 5 forces<br />Substitutes (HIGH)<br /><ul><li>They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs
  50. 50. The availability of substitutes invites customers to make price, quality and performance comparisons </li></ul>Suppliers (LOW)<br /><ul><li>The suppliers do not have the power to bargain the price of their product, since there are numerous suppliers.
  51. 51. Using production facilities in the Far East has give Nike economies of scale. </li></li></ul><li>Porter’s 5 forces<br />Competitive Rivalry(HIGH)<br /><ul><li>Reebok, offering more choice of shoe
  52. 52. Acquisition between Adidas and Rebook </li></li></ul><li>COMPANY STRUCTURE<br />
  53. 53. COMPANY STRUCTURE<br />Nike’s mission statement is:<br /> Nike aims to lead in corporate citizenship through proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike<br />Its vision statement is:<br />“To bring inspiration and innovation to every athlete in the world”<br />(If you have a body, you are an athlete)<br />
  54. 54. PRODUCTS<br />Baseball equipments Running shoe<br />AIR MAX T-shirts ,hoodies<br />
  55. 55. PRODUCTS<br />Outfits Golf equipments<br />Tennis shoes and balls Footballs<br />
  56. 56. COMPANY ANALYSIS (SWOT)<br />
  57. 57. COMPANY ANALYSIS (SWOT)<br />
  58. 58. Value chain analysis<br />
  59. 59. COMPETITIVE ADVANTAGE<br /><ul><li>Technology in Products </li></ul>Nike technology allows <br />consumers to connect their iPod<br /> devices to sensors inside the<br /> shoes to record time, distance, <br />pace, and calories burned.<br /><ul><li>Manufacturing Skills</li></ul>Due to cheap labor in foreign countries, Nike outsources virtually all production to other areas of the world.<br />
  60. 60. COMPETITIVE ADVANTAGE<br /><ul><li>Strength of Patents</li></ul>One of Nike’s most revolutionary technologies comes through its footwear cushioning. Competitors have tried to match rival Nike’s cushioning systems, but none have matched their success<br /><ul><li>Economies of Scale</li></ul>Nike is the single largest producer of athletic footwear and apparel, allowing them large cost advantages over competition.<br />
  61. 61. Current and future success<br />Nike challenges<br /><ul><li>Tightening competition – growth of Adidas, New Balance,
  62. 62. Marketing expenditures are growing steadily.
  63. 63. Losing market share in China
  64. 64. Nike’s premium and high quality brand image doesn’t sync with the expectations of the customer
  65. 65. Nike is heavily dependent on information technology systems across its supply chain</li></li></ul><li>Current and future success<br />Nike success<br /><ul><li>Nike shoes and other accessories have also become the favorite fashion products for teenagers.
  66. 66. Nike is known around the world for being one of the iconic brands
  67. 67. The Nike Air Max 2010 has been a great success for Nike
  68. 68. The Global 100 Most Sustainable Corporations in the World
  69. 69. one of the World’s Most Ethical Companies
  70. 70. In 2009 NIKE, Inc. scored the highest in nonprofit organization Climate Counts’ annual rankings.</li></li></ul><li>Current and future success<br />Future Success<br /><ul><li>Nike future performance is subject to the inherent uncertainty presented by volatile macroeconomic conditions that may have an impact on Nike operations around the world.
  71. 71. The company will continue to implement its corporate projects and programmes to suit the demand and social needs of its worldwide customers.
  72. 72. will become more socially responsible in the eyes of average consumers, and so the availability of its brand products will further increase. </li></li></ul><li>R&D<br />Nike has an underground research lab full of geniuses toiling to create the newest and most advanced designs and technology in the sneaker business<br />Research is primarily divided into three parts: <br />Biomechanics <br />How the body moves. <br />Physiology <br />How the body works, especially under stress. <br />Sensory/Perception <br />The evaluation of how a product works, feels, and wears; how a person feels when wearing the shoes. <br />
  73. 73. R&D<br />The research and development (R&D) centre's role is to identify the physiological needs of athletes<br />Nike spends a lot out of its revenue into R & D of new products and designs to constantly stay ahead of the competition. <br />
  74. 74. NIKE STRATEGIES<br />Segmentation Strategy:<br />High, medium and low income levels that can be clubbed with here lifestyles of high, medium and low end customers.<br />Target Market:<br />The company has targeted the market of high-end, high income level between the age of 16-55<br />
  75. 75. NIKE STRATEGIES<br />Marketing Strategy:<br />Nike focuses all of their attention on the Athlete, but delivers much more than shoes; they deliver all the surrounding products that the Athlete needs for experience. It is part and parcel of what makes Nike such a great consumer-focused brand.<br />Organizational Strategy:<br />With over 35,000 employees worldwide, the company was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure<br />
  76. 76. NIKE STRATEGIES<br />Advertising strategy:<br />The company focuses its marketing on celebrity endorsement, i.e. athletes in basketball, golf, soccer, and tennis. Lately, Nike has also began to sponsor big sporting events so as to create huge awareness and brand following<br />
  77. 77. FUTURE PLAN<br />Nike expects to Increase its future orders for delivery.<br />Nike will continue to focus their resources on those investments that drive sustainable and profitable growth. <br />The Company announced plans to grow the NIKE Brand in all six of its geographies <br />the Company outlined plans to open approximately 250-300 new NIKE-branded stores worldwide over the next five years <br />Increasing dividends within a target calendar year payout range of 25-35% of trailing four quarter earnings per share<br />Nike expected to have Return on Invested Capital of 25%<br />
  78. 78. Our Recommendation<br />Improve its marketing plan including advertising.<br />SIMPLFY ITS WEB SITE<br />Focus on setting up a reliable Information system <br />Nike should focus more on its labor working conditions and wages<br />Increase its market share in the middle-east.<br />Increase its acquisition due to increasing the threat from adidas and rebook merger.<br />