Back to top

Analyst Blog

The global sport equipment and apparel retailer, Nike Inc. (NKE - Analyst Report) declared its ambitious growth plans to boost shareholder value over the next four years at its recently held first Analyst meeting after more than two years. The company announced its key financial targets through 2017 that are expected to drive top and bottom-line growth as well as strong cash flow generation, which should in turn support acquisitions, dividends and share repurchases.

As part of its key financial targets, Nike hopes to increase revenues to $36.0 billion by 2017, recording a 4-year rise of over 42% from $25.31 billion in fiscal 2013. Further, the company believes that its revenues for fiscal 2015 will reach the $30.0 billion mark, touching the higher end of its previously forecasted range of $28.0–$30.0 billion.

The company, which competes with Deckers Outdoor Corp. (DECK - Analyst Report), intends to achieve its long-term revenue target through expanding stores, boosting e-Commerce capabilities as well as strategic investments toward product innovation and brand building.

Nike believes that its NIKE Brand segment alone will generate incremental revenues of $10.0 billion by 2017, while the Converse segment’s revenues are expected to grow over twofold to $3.0 billion from $1.45 billion in fiscal 2013.

The company expects that its apparel, women’s and e-Commerce businesses to support NIKE Brand’s growth. The company expects revenues from the segment’s Direct-to-Consumer (DTC) business to reach $5.0 billion by 2015 and $8.0 billion by 2017, primarily driven by increased e-Commerce sales as well as new store expansion.

On a geographical basis, North America, Western Europe and Japan will collectively generate an annual high single-digit growth rate in sales for NIKE Brand through the four-year period. This will be higher than the earlier projected annual growth rate in mid single digits.

Moreover, revenues in developing regions, which include Greater China, Central & Eastern Europe and Emerging Markets are expected to grow at a low double-digit average annual growth rate over the next four-year period.

Additionally, the sporting goods retailer outlined its key financial targets through 2017, which include an annual average growth rate of mid-teen-digit in earnings per share, maintenance of a mid-twenties rate of return on invested capital, annual average growth in low double-digits in free cash flow and spending 3%–4% of revenues toward capital expenditure annually. Furthermore, Nike announced that it would continue to focus on enhancing shareholder value through share repurchases and dividend payouts.

We believe that the strategies and targets outlined in the meeting, along with Nike’s diverse product portfolio, brand management, excellent operating team and competitive edge position it well for long-term growth. With these targets, the company is expected to effectively deliver value to both consumers and shareholders, going forward.

The Zacks Rank #2 (Buy) company has recently been named the most preferred apparel and footwear brand among upper and average-income teenagers by Piper Jaffray. The swoosh-logo brand outpaced the runner-up, Under Armour, Inc. (UA - Analyst Report) by a considerable margin. Among Nike’s peers, Adidas and Lululemon Athletica Inc. (LULU - Analyst Report) were declared to be the third and fourth most preferred brands.

Please login to Zacks.com or register to post a comment.