Nike announced quarter earnings this past week. The day after the announcement, the stock price was down, despite a 10% rise in revenue to $9.95 billion and 15 percent jump in profit to $1.1 billion that topped analysts' estimates.
Sales in North America increased by 6% in the quarter, accounting for about 40% of overall revenue. Sales in Greater China, excluding currency changes, soared 20 percent, while those in Nike's Asia Pacific & Latin America division were up 14 percent, and in its Europe, the Middle East & Africa segment jumped 9 percent.
Nike's efforts to sell its shoes and clothing directly to consumers are starting to pay off.
In addition, Foot Locker’s business model of serving as the middle man to sneaker manufacturer is total opposite to Nike’s future strategy of direct to consumer shoe seller.
Nike’s sell-off was an opportunity to get on board to go long because although Nike sells shoes and apparel, they are the greatest marketing engines in history.
Nike’s decision to make Colin Kaepernick the face of its new campaign is proving to be a huge commercial success. According to a report from CBS News, the value of the sporting apparel giant has soared by almost $6 billion, since it unveiled the former San Francisco 49ers quarterback as the main testimonial of its “Just Do It” 30th-anniversary campaign.
On September 13, Nike shares closed at an all-time high of $83.47 and last week Reuters reported that the company had sold 61 percent more merchandise since releasing the ad.
Nike’s exposure doubled, with 46 percent of shoppers talking about the company, as opposed to 23 percent on September 3, a day before the campaign was unveiled.
Yeah, this had a short term positive impact, but Nike also gained a bunch more Millenials as customers who support Kaepernick.
Then there is Tiger Woods. Tiger Woods originally signed with Nike in 1996, in what was reported to be a $100 million deal. Despite Tiger's car accident outside his Orlando, Florida home and his televised public apology, when he revealed to the world that he had been cheating on his wife in 2010, Nike made a gutsy call and supported Tiger in his endeavors to address is off the course issues.
The road back was tough, many didn’t think Tiger could return to form, which included four back surgeries, but in 2018 Tiger Woods returned to the PGA's Masters tournament in Augusta after a three-year break and Nike welcomed him back with an ad showing his career highlights.
Last weekend, Tiger Woods just won the Tour Championship, his 80th PGA Tour win, and his first in five years.
"Probably the low point was not knowing if I'd ever be able to live pain-free again,'' Woods said. "Am I going to be able to sit, stand, walk, lay down without feeling the pain that I was in. I just didn't want to live that way. This is how the rest of my life is going to be? It's going to be a tough rest of my life. And so ... I was beyond playing. I couldn't sit. I couldn't walk. I couldn't lay down without feeling the pain in my back and my leg. That was a pretty low point for a very long time.''
And what did Nike do, they just went on Instragram and used their Marketing prowess.
So even if you have the greatest product in the world, if you don’t know how to present / market a product it to people, it’s not going to sale. This is the single most reason, Nike’s product will continue to sell and outshine the competition. And sales of Nike’s shoes and apparel ended up creating shareholder value in the form of a rising stock price.
The chart suggested the dip in price this past week was an opportunity to get on board to go long.
My target based on the previous measured move remains $105, although I think it will be a stretch based on where we are in the business cycle.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
