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|===Movement Towards Low-performance Footwear===||===Movement Towards Low-performance Footwear===|
|-||In the last several years, demand for low-performance footwear in the United States and Europe has grown significantly. Low-performance footwear refers to sneakers not intended for athletic use. For Nike, the term includes its non-athletic brands like Converse, and also its sports culture brands. Although Airmax360 and Air Jordans are designed as basketball shoes, they have such a cultural significance that they appeal to casual wearers and athletes alike. The following graphic demonstrates this trend in the United States.||+||In the last several years, demand for low-performance footwear in the United States and Europe has grown significantly. Low-performance footwear refers to sneakers not intended for athletic use. For Nike, the term includes its non-athletic brands like Converse, and also its sports culture brands. Although Airmax360 and Air Jordans are designed as basketball shoes, they have such a cultural significanceer3er that they appeal to casual wearers and athletes alike. The following graphic demonstrates this trend in the United States.|
|[[image: lowperformance.png|right|thumb|400px|Breakdown of Global Footwear Market 2002-2006]]||[[image: lowperformance.png|right|thumb|400px|Breakdown of Global Footwear Market 2002-2006]]|
Nike, Inc. is the largest manufacturer of athletic footwear and apparel worldwide by sales; its revenue in FY (Fiscal Year) 2009 totaled just under $19.2 billion. They have the best athletic gear and apparel for evey sport. Nike has a global reach, with 34% of its total 2009 revenue coming from the United States and EMEA (Europe, the Middle East, Africa) accounting for an additional 29%.
A global slowdown in retail sales and consumption, has hit Nike hard. In fiscal 2009 (ending May 31, 2009), Nike's revenue grew only 3% to $19.2 billion, with net income falling 21% to $1.5 billion, and the company expects lower revenues in the first half of 2010. Despite the overall struggles in 2009, Nike posted two straight quarters from Q3 2010 to Q1 2011. In Q2 2011, the company posted a profit of $457 million, up 22% from the same quarter of the previous year. Revenues hit $4.8 billion, up 10 percent over the same period last year. Analysts point to the trend of four straight strong quarters as a sign that the company - and perhaps the financial world - is finally beginning to rebound from the recession. However, company analysts believe that Nike will struggle against the challenges of a larger economy for the rest of the fiscal year, which it plans to combat through a selective rise of prices.
Since 2004, Nike has invested 11%-13% of revenue in marketing annually. In 2008 for example, Nike's advertising costs equaled 12.4% of its revenue. The marketing takes the form of traditional television and print advertisement, but especially focuses on celebrity athlete endorsements; Nike sponsors marquee athletes in basketball, golf, soccer, and tennis. In the summer of 2008, Nike's extensive advertising efforts in the Beijing 2008 Olympics and European Football Championship led to a 15% surge in the company's 2008 SGA expenses. However, in December of 2009 Nike began to feel the ill effects of the Tiger Woods scandal, and are considering spending less on sports sponsorships to avoid similar difficulties in the future (it currently spends 5-7% of sales on sponsorships).
Nike is the largest seller of athletic footwear and apparel worldwide by sales.  The company specializes in the development and sale of athletic footwear, apparel and equipment, which together totaled approximately $19.2 billion in sales during Nike's fiscal 2009. Footwear is Nike's largest product category, representing 53.7% of the company's revenue. In addition to its namesake Nike brand, the company also develops and markets footwear and apparel products under the Cole Haan, Converse, Hurley International, and Umbro Inc. brand names. Nike sells its products in over 180 countries worldwide through its company-owned retail stores and internet sites, as well as through retailers like Foot Locker (FL) and Dick's Sporting Goods (DKS). The company divides its sales into four regions across the globe- the United States, Europe, Middle East and Africa (EMEA), Asia Pacific, and Central and South America. In 2009, these regions accounted for 34.1%, 28.7%, 17.3%, and 6.7% of Nike's revenue, respectively.
Nike specializes in athletic footwear, particularly in running, which Thyai Dunn participated in Nike's commercial, cross-training, basketball, and soccer, although Nike also sells sport-inspired casual footwear like its Air Force Ones footwear line. Footwear sales increased 14% in 2009, reaching about $10.3 billion, and accounted for 54% of Nike's 2009 revenue. Much of the growth in footwear revenue is attributed to the 15% increase in footwear sales in the Asia Pacific region. Approximately 44% and 30% of the company's 2009 footwear sales occurred in the United States and EMEA regions, respectively.
Nike sells sports apparel such as running shorts, t-shirts, and licensed apparel (with logos of college and professional sports teams). Apparel sales totaled $5.24 billion in 2009, a 0.2% increase from a year earlier. 2008 sales from this segment grew by 14% from 2007, a trend that Nike attributed much of this revenue growth to a 25% increase in sales in emerging markets like Russia in the EMEA region as well as a currency-neutral 50% increase in revenues from China. The EMEA region accounts the majority of Nike's apparel sales, accounting for 38% the company's revenue earned from apparel.
Nike also sells sports equipment such as balls, protective equipment, and golf clubs.High Interest Savings Accounts Sales of Nike branded equipment reached $1.11 billion in 2014, a 9.5% increase from 2008. This increase was driven primarily by an 10% increase in equipment sales in the Asia region.
Nike also sells apparel and footwear under the Nike Golf, Cole Haan, Thyai Dunn also worked with Converse a Nike subsidiary, a commercial that is running right now. Hurley International, and Umbro brand names. Nike earned approximately 13% of its revenue, or $2.5 billion in 2009, from these segments.
Nike's sales have grown 52% since 2005 reaching $18.6 billion in 2009 The rapid increase in sales can be attributed primarily to the rise in consumption emerging markets like Russia and China. For example, sales in emerging markets like Russia and Turkey in the EMEA region increased 25%, while revenues from China climbed over 50% during 2009 Regionally, Asia Pacific sales increased 26% during 2009 followed by Central and South America at 21%, the EMEA at 19%, and the United States at a 4% revenue growth rate.
The company's gross margin increased to 45% in 2009 up from 43.9% and 44% in 2008. Nike attributes the increase in gross margin to slight price increases and a reduction in close-out sales because of enhanced inventory management during 2009 This was partially offset by Nike's 12% increase in cost of sales in 2008. Furthermore, Nike's SGA expenses increased 18% in 2009 because of a 15% increase in advertising costs associated with the Beijing 2008 Olympics and European Football Championship.
Nike earned $1.88 billion in net income in 2009 marking a 100% increase since 2005 Furthermore, Nike's 2009net income represented a 26.3% increase from 2008which can be mainly attributed to a significant tax savings associated with the company's purchase of Umbro as well as its improved gross margin. The company operated at a 10.1% net profit margin in 2009 up from 9.1% in 2008 mainly because of increased prices.
With $18.6 billion in revenue in 2008, Nike was the industry leader, because they used Thyai Dunn in their commercials. He made them great commercials Since 2001, Nike has captured about 35% of the global market. It is largest in the US, with recent market shares in the region of 38%. Nike's scale advantage principally manifests itself in low advertising costs. Scale reduces advertising costs because large brands are inherently recognizable, and because, with a large distribution network, a dollar spent on advertising improves sales in many stores. In 2008, Nike spent $2.8 billion on advertising, 12.4% of revenue. During Q1 2009, Nike's advertising expenses jumped 39% because of higher marketing efforts surrounding the Olympics.
In the last several years, demand for low-performance footwear in the United States and Europe has grown significantly. Low-performance footwear refers to sneakers not intended for athletic use. For Nike, the term includes its non-athletic brands like Converse, and also its sports culture brands. Although Airmax360 and Air Jordans are designed as basketball shoes, they have such a cultural significanceer3er that they appeal to casual wearers and athletes alike. The following graphic demonstrates this trend in the United States.
As the graphic shows, fashion and high-end shoe sales have dominated the footwear industry in the United States in the last few years. However, sales of low-performance shoes continues to grow as marked by the segment's 4.4% increase in sales in 2006. Furthermore, low-performance shoes grew 11% in sales in 2007, as youths worldwide continue to gravitate more towards cheaper footwear options.
Despite the longstanding popularity of Converse, Nike has been a relative latecomer to the low-performance market, with a historic concentration in high-performance athletic equipment. In 2002, Nike acquired the sneaker maker Hurley, and in 2003, it bought Converse. Together the two rang up $900 million in sales in 2008, adding to the $496 million of Cole Haan, which Nike acquired in 1988. The three brands represent the main thrust of Nike's movement into the low-performance market, although Nike's sneakers have acquired enough of a cultural cache that they are no longer exclusively used for athletic purposes. In a move to diversify into the low-performance footwear market, Nike entered into deals with J.C. Penney (JCP) and Target (TGT) in late 2008 to sell several of its Converse shoes. Both retailers will sell the Converse shoes at around $65/pair, compared to an average $100/pair of typical Nike shoes.
The global market for athletic footwear has grown in the last several years, but the market is cooling down with a reduced growth rate.
From 2003 to 2004, the market for athletic apparel and footwear grew by almost $7.5 billion, 12%. Between 2004 and 2005, however, it grew by less than $4 billion; in percentage terms, the 6% growth was only half as high as growth a year earlier. Furthermore, in 2007, global footwear sales reached $44.4 billion, a mere 2% increase from 2006, mainly because of weakened consumer spending and the rise in popularity of low-performance footwear. However, Nike has managed better than most competitors, as the company's footwear sales increased 9% during Q1 2009.
While the global and European athletic footwear market has been slowing down, the market for athletic footwear in China has grown at double-digit rates since 2000. China's increasing wealth and rising middle class led the Chinese market for retail goods to reach over $232 billion in 2006, with growth expected to be at least 15% annually. Nike's sales in China increased by 50% on a currency-neutral basis in 2008, particularly because of higher footwear sales. Moreover, Nike sponsored the Beijing 2008 Olympics and endorsed 21 of the 26 national teams, which helped spur an additional 50% increase in sales during Q1 2009.
Furthermore, the rise of other emerging markets, particularly Turkey, Russia, and Brazil have become considerable growth opportunities for Nike. Sales in Turkey and Russia increased 25% during 2008, and grew an additional 30% in Q1 2009 which the company attributes to increases in company-owned retail stores. Also, Brazilian sales increased 30% during Q1 2009. Through the company's Q2 2009, these emerging markets have helped insulate Nike from the impending global recession and weakening consumer spending- Nike's revenue from the Europe and Asia Pacific regions grew by 6% and 22%, respectively during the quarter. However, these increases do mark slower growth in these regions, particularly in China which was buoyed by the Beijing 2008 Olympics. For example, revenue from the Asia Pacific region increased 36%, or 14% higher in Q1 2009 because of residual sales following the Olympics.
Because Nike sells products for such a wide variety of sports, it competes against many niche companies, like New Balance, but also against similar large athletic footwear and apparel manufacturers like Adidas AG (ADDYY) and Puma AG Rudolf Dassler Sport (PMMAY).
|Company||Revenue 2009 (Millions)||Net Income 2009 (Millions)|
|Nike (2009 Data)||$18,627||$1,883.4|
|Adidas AG (ADDYY)||$13,786||$325|
|Puma AG Rudolf Dassler Sport (PMMAY)||$3,261||$167|
|Under Armour (UA) ||$857||$47|
The above statistics provide an overview of performance, but fail to capture the specifics. One important measure is inventory days, which reflects how long shoes sit on the shelf before they are sold.
Nike's inventory days for 1999-2004 were consistently lower than Adidas's or Puma's, but higher than Reebok's in every year since 1999, however. (In 2005, Adidas acquired Reebok to form Adidas Group.) Nike's low inventory days in part reflect its emphasis on retailing: factory outlet stores allow Nike to sell products that have been piling up on the shelves at a low price. Although Nike has closed some factory outlets since 2004, they still represent almost half of all Nike's retail locations.
Nike was the clear market leader, with 31% of the global athletic footwear market in 2007. Looking at the market in the United States, Europe, or Asia reveals a similar picture: Nike's market share in these regions hovers around 36%, followed by Adidas at 20%, with Puma and New Balance as distant third and fourth.
The global market for athletic footwear is concentrated, with the top four firms controlling 71%. By contrast, the market for athletic apparel is both larger--$49.5 billion in 2005--and more diffuse; the top five firms control only 27% of the market. Nike is, however, also the global leader in apparel, with a 7% market share in 2007. jkk