Nike's (
NKE
) global footwear market share has consistently grown over the
years reaching about 17% at the end of 2010. We attribute this
success to its strong marketing and innovation as well as growing
demand from emerging markets like China. But rising input costs and
air freight have been a concern for Nike, which contributed to the
company providing lower gross margin guidance by 50 basis points in
2011 vs. 2010. (See
Nike's Earnings Re-Iterate Gross Margin Pressure
) Nonetheless, we believe the company has bright prospects in new
markets like China that will give it an edge over rivals like
Sketchers (NYSE:SKX), Adidas AG (
ADS
), Steve Madden (
SHOO
) and K-Swiss (
KSWS
).
Innovation with Sustainability Key for Nike
Nike has continuously endured and focused on innovation for its
products which makes it such a popular brand. The company made
shoes that communicate information regarding distance and speed to
the runner's iPod for instance. The "green rubber" that it
developed in the early part of the decade lowered production costs
and toxic emissions during manufacturing and is an example of
innovation tackling the issue of sustainability.
Nike maintains that its products are made from recycled,
renewable materials and are chemically optimized to reduce the use
of toxic substances. This "going green" trend will definitely
continue to boost its brand image and market share in the long
run.
In an annual CNN Money issue, Nike was ranked 3rd in Fortune's
World's Most Admired Companies in Innovation
for 2011 preceded by Apple and Google..
Immense Opportunity in China
China is not only one of the key manufacturing plants for Nike
but also a profitable one to sell its products. With an opening
economy, China presents a lucrative growth opportunity that can
help Nike gain share in the sports products market. The company
opened its biggest distribution center in Asia in the Jiangsu
province of China, and according to the company, the center will
optimize distribution time and logistics ensuring faster delivery
of products to its Chinese consumers.
We expect it to continue benefiting from strong demand in China.
While we anticipate Nike's global footwear market share will
increase gradually to over 20% by the end of our forecast period,
Trefis members predict the share will be in the range of 21%-22%,
implying ab0ut 5% upside to our NKE stock price estimate and a
total return of 15%.
We currently have a
Trefis price estimate of $76.52 for Nike's stock
, about 10% above the current market price.
See our
complete analysis for Nike.