Financial Anaysis: NIKE Inc - Research Paper Example

Financial Analysis: NIKE Inc. Company Overview Nike Inc rates as one of the world’s best manufacturer of athletics apparel and footwear. This company has captured the lion’s share of US athletic shoe market, and currently, it rates first in the global market despite competition from companies like Adidas and Puma. Nike is a unique brand that manufactures and sells various sportswear items and uniforms for many forms of sports ranging from tennis, soccer, badminton, rugby to track events. Nike operates many outlets in the world, for example, NIKETOWN sportswear and shoe stores; NIKE factory outlets; NIKE Women stores, and it also sells its products online.

Currently, the company has over 700 Nike retail shops on a global scale and in the US alone, there are about 24,000 retail accounts. Apart from this, the company has licensees and independent distributors in various countries around the world. Nike employs over 38,000 people currently and with 321 executives, the company has made tremendous steps in the market segment (Smith 56). Financial Performance NIKE Inc. has continued to perform notably well in the market segment. Reports for the FY2012 first quarter that were released on 22nd September 2011 illustrate the proficient financial performance of NIKE Inc.

The reports indicated that revenues for the company shot up to $6.1 billion, representing an increment of 18% in revenues. Diluted earnings per share shot up by 19% to reach $1.36 billion. In the same period of time, inventories of NIKE inc. rose up by 41 % from the previous quarter. Worldwide futures orders for NIKE were also proficient in performance as they recorded a 16 % increment. All these figures recorded by the company are record figures, and this is an indication of the strong market performance of NIKE Inc.

This can be attributed to an enhanced demand for NIKE products and tax efficiencies when purchasing NIKE Inc. items. Furthermore, the company has extended its performance in the market segment as a result of a lower average share count as compared to its competitors. As a result of this, impacts of lower gross margins have been offset, which has given the company a competitive edge (Everatt & Slaughter 65). The company has experienced a strong start in the FY2012, which is encouraging to any interested investor.

Statistics indicate that the company has been a noteworthy performer in the stock business, which should give any investor in NIKE stocks hope and positive anticipation. For example, the earnings growth rate currently stands at 13.1%, which implies that investors are highly likely to make profits from company stocks if present factors are constant. The last one year return reads 16.498% which further compounds the belief that stock business with NIKE Inc. is expected to be a success. SWOT Analysis a) Strengths As a result of its unique brand and a wide business portfolio, NIKE performs notably well in the market segment despite the flooding of many competitors.

The company is also unique in the sense that it has no factories, which has ensured that it is a lean organization. The company has proficient development and research which uses the principal of quality innovativeness. The company is able to produce quality products even with a low price, which has enhanced its reputation among customers. As a result of this, NIKE products are globally recognizable, and this is a marketing tool (Needles & Powers 83). b) Weaknesses Product diversification is not as high as other sportswear companies.

The company instead depends on its market share to earn considerably. As much as NIKE Inc. gets enough income, this trait means that the company is vulnerable to collapse in case its own market share is eroded. c) Threats The global nature of trade exposes NIKE Inc. to various threats, which are likely to compromise its market performance. This is because the company keeps buying and selling in various countries, therefore, margins and costs are not stable over a long period of time. This would culminate in NIKE manufacturing and selling products at a loss.

However, this threat not only faces NIKE Inc, but also other global brands. Conclusion NIKE Inc. is a company that has exhibited noteworthy market and financial performance for a long time. Over the past year alone, the company has outperformed other global brands in terms of financial and stock performance. This should be encouraging to clients who wish to invest in the company. The company began the 2012 fiscal year on a high note and figures still keep rising. Share repurchases, long term debt payment and dividend payments have also increased year after year.

The first quarter of the FY2012 indicates that the net income for the income for the company increased by 15% to reach $645 million. Moreover, diluted earnings for every share traded increased by 19%. Therefore, these values indicate that investment at NIKE Inc. is a profitable venture. Even though the company faces competition from other sportswear brands like Puma, Reebok and Adidas, it has managed to establish its market shares, hence, has continued to retain the number one spot. I would, therefore, recommend that my friend invests in NIKE Inc.

Works Cited Belverd E. Needles, Marian Powers. Financial Accounting. California: Cengage Learning, 2009. Print Donna Everatt, Kathleen E. Slaughter,. Nike Inc: developing an effective public relations strategy. Ontario: University of Western Ontario, 2009. Print Miller-Jones, Edward R. Nike Inc.: The Victorious Sports Equipment Brand. New York: FastBook Publishing, 2008. Print Smith, G.E. Nike, Inc: the WetFeet.com insider guide. New York: Wet Feet Press, 2010. Print