Nike and Its Performance


About Nike

The Nike is engaged in the design, development, and marketing and selling of athletic footwear and related products. The company has its presence in a number of developed and developing countries through a portfolio of brands such as NIKE brand, Jordan Brand and Hurley and Converse. Over the passage of time the company has increase its offerings by expanding its product line and introduced new products in the categories of digital devices, protective equipment and other equipment designated for sports activities.

The competitors of the Nike are Adidas, ASICS, Li Ning, Lululemon athletica, Puma, V.F. Corporation and Under Armour.

Recent developments and future performance

Nike has unveil its new Nike Air Max Plus model. This footwear has many performance benefits in sports and other related activities. The Nike’s sales were up for the last three quarters of this year and this trend is expected to continue in 2019. The major trigger points for the forthcoming years are as follows:

  • Strong sales growth in US markets as the consumer spending is going to remain firm.
  • Cooling of the tensions between United States and China on trade issues.
  • Strong operational performance is expected to result in the margin expansion.
  • New innovative products are going to serve as additional impetus to the stock price and the valuation of the company.
  • The company is expected to sustain its dividend growth over the next year

Financial performance

Excluding the effects of exchange rate, the revenues of the corporation increased by 4 percent. This growth translated into gross margin of 43.8 percent as compared to 44.6 percent in the previous years. However, it is to be noted that the decrease in the gross margin was due to the non-operational factors such as adverse exchange rate movement together with negative contribution of financial hedging instruments. The prices and costs of the Nike products remain flat throughout the year.

The lower EBIT margin in the fiscal year 2018 was due to the increase in demand creation expenses coupled with higher marketing costs. Effective tax rate of whopping 55.3 percent in 2018 was largely the impact of the Tax cuts and Jobs Act. However, the increment in the tax rate was a provisional expense that might be adjusted in the following years

Over the span of last five years, the revenues of the company expanded by 7.69% on average per year. Operating profit also ascended by 7.12 percent per year on average during this period. EBIT increased by 6.42 percent over the period of five years.

Future performance

As far as the analysts of Citi group are concerned, they termed the NKE as the best idea of 2019. The firm has also named this stock as its top pick in the upcoming year. This sentiment came on the back of softening of trade battle between two economic giants i.e. United States and China. 

Tracing the past performance of the company into the future in the light of above-mentioned triggers, the share is expected to give the return of 20.28 percent with the dividend yield of 1.21%. This totals to 21.49 percent. The consensus target price of $87.24 with the time horizon of one year.


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