Nike's Growth Momentum Nike Kobe 9 Elite Officially Unveiled Continues

Nike's Growth Momentum Continues

Sales increased last month as back to school shopping kicked into high gear with consumers spending more on clothing and footwear. According to research by NPD group, children's basketball shoe sales jumped 70% during the four weeks ending August 17 compared to last year. The overall athletic footwear market grew 3% during the back to school shopping season.

Power brands such as Nike Inc. (NYSE: NKE) cashed in on the back to school shopping spree in athletic attire. Basketball-related footwear has been a dominant player this year in the athletic footwear market. NPD said that basketball-related footwear accounted for 26% of all children's apparel purchases reflecting an increase of 17% compared to last year's sales. Nike dominates the basketball footwear market with a share of 96%. Nike's shares have surged by almost 8% in the last month given the increase in sales of basketball-related footwear as well as the new product and strategic moves the company is adopting.

Demand CreationIn order to create demand for its products and increase its revenue Nike has spent 11% of its sales on demand creation, which includes payments to athletes and advertisements to attract customers. Nike is the world's largest sporting apparel maker and hasn't been challenged on many endorsement deals. Recently the company signed a 10-year endorsement deal worth $300 million with basketball star Kevin Durant. With this deal, Nike has regained the sponsorship of the NBA's most valuable player. The sponsorship deal with players like Kevin Durant will generate engagement and online interactions that improve brand popularity and extend the shelf life of its products.

Recently Michael Jordan's appearance at Roger Federer's first round match at the US Open wasn't the case of one sports legend cheering another; it was actually a carefully arranged marketing campaign to promote Federer's new line of tennis shoes. This campaign resulted in the huge success of limited-edition shoes priced at $200 per pair that were gone in less time than it took Federer to finish the match. Currently Nike's $4.5 billion basketball segment dwarfs its tennis segment Nike Kobe 9 Elite Officially Unveiled. "The basketball business is really good right now but it is a fashion swing and we can swing away from it as quickly as we swung into it," Matt Powell a sports wear analyst said. The tennis segment may have the potential to fuel the future growth of the company.

Unmatched InnovationTo provide cutting-edge products to its customers Nike is focused on accelerating the level of innovation it brings to its products. Nike recently introduced KOBE 9 Elite the first basketball shoe to utilize its unique Fly Knit technology. This technology is saving the company tons of money as fly knit material is lightweight, minimalist, and fits like socks. This new technology reduces labor costs by 50% and cuts material usage by 20% resulting in .25% higher margins Nike Lebron 12 For Sale.

Nike is also utilizing 3D printing machines to build the soles of some of its shoes including the Vapor Laser Talon soccer cleat. By making use of the latest technologies Nike is transforming its footwear manufacturing process from a low value and labor intensive to one that is more automated and adds higher value. These innovations will serve as long-term growth drivers for the company.

Recent Performance at a GlanceNike reported outstanding fiscal year 2014 results with consistent growth in revenues, gross margins, income from continuing operations, and earnings per share. The company's revenue increased by 10% and slightly outpaced the industry average. Net income from the company's continuing operations improved by 10% leading to an 11% increase in the company's earnings per share compared to last year results. Such a strong performance transformed the strong financial position of the company. It has generated $3 billion in cash flow from operations and the company has a cash position of $5.14 billion on its balance sheet compared to its relatively low debt of $1 Cheap Sale Kobe Shoe.43 billion. With such a strong financial position, it won't be an issue for Nike to increase its marketing and product innovation efforts.

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Source: Nike s Annual Report 2014

Analyst OpinionThe following is a summary of Nike's valuation provided by 24 brokers. The consensus price estimate reveals considerable upside potential. The mean target price estimate is $86.08 presenting an upside potential of 5% at its current price of $82.02. The most optimistic price estimate, if materialized, presents an upside potential of almost 22% at its current price which I think the company will achieve given the recent efforts to create demand for its product line and the company's ability to innovate in a rapidly changing environment.

Source: Yahoo Finance

Final VerdictNike has become stronger in the athletic footwear and apparel industry. The company's strong ability to innovate and market its products along with its strong financial position will allow it to sustain momentum in the future. (More.)