Tags: Nike | dominates | sporting | NKE

Nike Dominates Sporting Goods

Wednesday, 04 Jan 2012 03:45 PM

By Dan Weil

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Nike (NKE), the world’s largest sporting goods maker, dominates the market for athletic apparel and shoes, a market it has revolutionized in its 47 years of existence.

The revolution has come in the form of constant technological improvements to boost the performance of its products and a marketing machine almost without parallel. The fact that Nike has iconic athletes in its endorsement stable — names that include John McEnroe, Michael Jordan, and Tiger Woods — helps it in both marketing and product development.

Even during lean economic times, when consumers have less wherewithal to buy sporting goods, Nike outperforms its competitors, the largest one being Adidas (ADDYY).

Company co-founder Phil Knight, a track athlete in college, got Nike started with running shoes. Then it was basketball shoes, thanks largely to legend Michael Jordan, that sparked explosive growth for the company in the 1980s and ’90s.

Now, with the $600 million purchase of Umbro in 2008, Nike has made a splash in the world of soccer shoes and apparel. It is now challenging Adidas for sales supremacy in those categories. Nike outfitted more than half the teams in the 2010 World Cup, including powerhouses Brazil and France.

As for upcoming events, the 2012 summer Olympics in London and the 2012 European Soccer Championships will give Nike a chance to shine. Meanwhile, the company has turned itself into the biggest sporting goods seller in China, with sales there estimated to top $2.3 billion in fiscal 2012, ending May 31.

The company’s profit rose 3 percent to $469 million in the quarter ended Nov. 30 from a year earlier. Sales gained 18 percent to $5.7 billion.

Strong fundamentals

Standard & Poor’s analyst Jason Asaeda has a four-star buy rating on Nike shares. “We see strong fundamentals and a dominant global brand with exceptional international growth opportunities supporting the share price,” he writes.

“NKE has launched new retailing and marketing strategies designed to more closely align the company's operations with key markets. We expect NKE to pick up market share in most product categories, as consumers tend to opt for established brands in uncertain environments.”

The company next reports earnings around March 20.

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