“From January 1990 until December 28,2021, Nike stock has returned roughly 29,210% versus 2540% for the S&P 500. That’s just over a 11x return over “the market” over a 31 year period. That’s what we call a Mega-Brand.”
COMPANY PROFILE
NIKE designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories worldwide. The company offers NIKE brand products in six categories, including running, NIKE basketball, the Jordan brand, football, training, and sportswear. It also markets products designed for kids, as well as for other athletic and recreational uses, such as American football, baseball, cricket, golf, lacrosse, skateboarding, tennis, volleyball, walking, wrestling, and other outdoor activities; and apparel with licensed college and professional team and league logos, as well as sells sports apparel. In addition, the company sells a line of performance equipment and accessories comprising bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, and other equipment for sports activities; and various plastic products to other manufacturers. Further, it provides athletic and casual footwear, apparel, and accessories under the Jumpman trademark; casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks; and action sports and youth lifestyle apparel and accessories under the Hurley trademark. Additionally, the company licenses agreements that permit unaffiliated parties to manufacture and sell apparel, digital devices, and applications and other equipment for sports activities under NIKE-owned trademarks. It sells its products to footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis, and golf shops; and other retail accounts through NIKE-owned retail stores, digital platforms, independent distributors, licensees, and sales representatives. The company was formerly known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon.
Style Factor Benefits
From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Nike scores well as of 12/28/21:
100% in our proprietary Mega Brands Screen
94% high FCF growth
83% in strong price momentum trends
74% in attractive dividend growth trends
89% low default probability, a proprietary screen
90% high operating ROIC
90% wide moat rating
80% high absolute free cash flow
90% strong EPS and sales revision trends
82% 1 year EPS growth
98% high operating leverage, a proprietary screen
12/29/21 Update
This quarter again shows how much pricing power Nike has and how many levers they have to adapt to external issues like trade wars, supply chain disruptions, and unpredictable macro events. Nike is a growth brand and they continue to deliver on new innovations across products and digital technology. They are making strategic acquisitions where appropriate (NFT’s & Web3.0) and in data science categories. Nike is a staple of the brands portfolio and I don’t see that changing any time soon. Why? Because they sell everyday apparel, shoes, and sports gear around the world and they have the pricing power needed to keep margins and demand high. Pricing power is a staple of aspirational brands and it’s one of the things that makes such a monster stock over the long-term. Nike ads probably inspire me more than any other brands. Nike is absolutely the best marketing firm that’s ever been created. Every once in a while they have a mis-step, the stock pulls back, and you get a chance to buy more. Nike is planning on ramping up marketing spend in Asia after a few slower than normal quarters. No other brand can compete when Nike starts to spend. The digital transformation is well under-way and the improving operating metrics are the net result. They are not done.
Nike is easily a top 5 most recognized and admired brand around the world. They do not rest, they do not settle, they do not like to lose. As an investor in great brands, what else could you want from a management team? From its humble beginnings with Phil Knight selling shoes out of his car, Nike has become the most dominant and profitable shoe company on the planet. It’s popular advertising campaigns have created brand loyalty like few other brands in history. Nike has figure out how to tap into our inner-most drive and strength to be more than we currently are. Sometimes their ads are controversial, which often drives an even more positive feedback loop in the end. Nike’s marketing prowess is truly a thing of beauty. Nike has evolved to a lifestyle brand and sells high quality apparel and shoes at a variety of important price points. That makes their business more consistent and predictable. With North America on fire, Europe improving and Asia a key focus, I think this stock has much high levels ahead. It’s not cheap nor should anyone expect it to be.