Athletic Footwear

NIKE, Inc.

Everybody knows Nike <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NKE)") else Response.Write("(NYSE: NKE)") end if %>. From Phil Knight hawking shoes out of the trunk of his car in the 1960s to the formation of an athletic shoe and apparel empire for the 1990s, Nike has become a part of the public consciousness along the way. Nike is controversy, like appropriating Beatles songs for TV spots, alleged sweatshops in Thailand, and flame logos that resemble the Arabic word for Allah. Nike is art-house commercials, the "swoosh," and "just do it." Nike is also profits, with close to 40% of the world market for athletic shoes.

Key growth markets for Nike include soccer, hockey, and golf. With its purchase of Bauer, the company has wrapped up one of hockey's best brands. In soccer, the company has returned to its roots of supporting amateur competition as well as putting its world-class marketing machine to work. With its sponsorship of Tiger Woods, golf is becoming a household topic of discussion -- no mean feat. In the multi-billion dollar highly fragmented golf apparel market, there are no dominant players. Combined with its serious-minded sponsorship of the Nike Tour (formerly the Hogan Tour) as well as its mass-market advertising, Nike is making strong inroads into a market where the is little reason why it can't become a major player.

Despite 1997 revenue growth of 42% making 1998 comparisons difficult, Nike may yet have room for share appreciation as inroads are made in international apparel (45% of 6-month trailing orders have been outside the U.S.). Estimates of $3.50 EPS two years out define Nike as a 14% annualized grower. Assuming maintenance of existing domestic athletic shoe and apparel margins and flat growth in the segment, a 46% increase in international revenues will make this earnings forecast a reality, allowing Nike's share price to appreciate at around its P/E multiple. Since the market is already building in smaller multiples with next year's estimates, we think there may be upside to those estimates. Our expectation of 15% to 20% shareholder return over the coming twelve months makes this company and stock the best of the lot.

Latest Financials

Fourth quarter net income totaled $155.8 million or $0.52 per share compared to $133.7 million, or $0.45 per share. Fourth quarter revenues were $2.37 billion, up 28% from $1.85 billion last year. For the fiscal year ended May 31, 1997, net income grew to a record $795.8 million or $2.68 per share, increases of 44% and 43% respectively, compared to $553.2 or $1.88 per share in fiscal 1996. Worldwide revenues increased 42% to a record $9.19 billion, compared with $6.47 billion in fiscal 1996.

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