) brand identity along with its strong marketing has been a key
factor behind its global success. Nike recently sold its
brands to focus on its namesake brand. Additionally, the company's
products were featured in several major global sporting events such
as the Summer Olympics, NFL and UEFA EURO 2012.
Nike branded footwear and apparel account for approximately 80%
of Nike's value according to our estimates. The brand is well known
globally, and we believe that significant opportunities exist in
emerging markets where the purchasing power and the demand for
branded sports products are rising.
See our complete analysis for Nike
To Focus On
Nike has focused on its smaller brands in the past to make sure
that they are complementary to Nike's brand image. Even though
has good brand appeal and potential, its product offerings, such as
leather handbags, leather shoes, loafers etc. are different from
Nike's core product assortments (athletic apparel, footwear &
product offerings (soccer focused footwear, apparel and equipment)
are similar to Nike's, it accounted for a combined loss of $43
million in fiscal 2012 along with
Nike further expected a loss of $75 million from these two brands
in fiscal 2013
sales were partly impacted by a weak performance from the English
soccer team in Euro 2012 tournament.
The company recently stated that its decision to sell
will allow it to divert its resources to
, which still offers the highest growth potential.
Leveraging Major Sporting Events
The 2012 NFL Season was significant for Nike as
it entered a new five-year contract for exclusive rights
to all of the National Football League's team uniforms. The
contract was previously held by Reebok. Nike is reportedly paying
nearly $1.1 billion for it over the next five years. Considering
the enormous popularity of the NFL in North America, we believe the
deal represents a good opportunity for Nike to showcase its
athletic apparel. A recent poll suggested that the NFL's popularity
in the U.S. has risen and that 59% of the U.S. population follow
We currently forecast roughly 5.5% share for Nike branded
apparel in the global sports apparel market for 2013. In a
scenario where this figure rises to 6% instead, there could be
~5% upside to our price estimate for Nike.
Nike also leveraged the summer Olympics and Euro 2012 to
showcase its products.
We expect Nike's footwear division, which constitutes roughly
50% of its value
, could be the biggest gainer from these sponsorships.
To note a historical precedent, during the 2008 Beijing
Olympics, Nike introduced the Flywire and Lunar lines of
footwear, which currently generate nearly $2 billion in annual
Our price estimate for Nike is $56
, implying a premium of about 5% to the market price.
How a Company's Products Impact its Stock Price at