2. Company Profile
Nike began as Blue Ribbon Sports
in 1967.
Primarily designs, develops,
markets and sells athletic
footwear, apparel, equipment and
services.
Nike’s brand includes:
- Jordan Brand
- Hurley
- Converse
Using information from 2015 financial reports.
3. Global Impact
Largest seller of athletic sportswear in the world.
Online sales presence via Nike.com and Converse.com
US STORES
339
INT’l STORES
592
Using information from 2015 financial reports.
5. Key Financial
Ratios
A Look Into How Nike’s Uses Capital
MVA (2015)
71.3B
EVA (2015)
2.28B
Return on Invested Capital
2013 2014 2015
17.6% 19.1% 21.3%
Using information from 2015 financial reports.
6. Key Financial Ratios (cont’d)
Nike Under Armour Lululemon
Revenue Growth 10.1% 28.5% 14.7%
Debt to Capital Ratio (total) 9.0% 28.6% 0%
Return on Equity 26% 13.9% 25.9%
Return on Assets 15.2% 8.1% 20.2%
Using information from 2015 financial reports.
7. Key Financial Ratios (cont’d)
Efficiency Ratios
Nike Under Armour Lululemon
Days of Inventory Outstanding 96 days 139 days 99 days
DSO 40 days 40 days 2.3 days
DPO 47 days 35 days 3.6 days
Cash Conversion Cycle 89 days 144 days 97.3 days
Using information from 2015 financial reports.
9. Projections
*In millions.
ASSETS
Cash 3,852
Short-term Investments 2,072
Receivables 3,651
Inventory 4,716
Prepaid Expenses and Other Current Assets 2,140
Current Assets 16,431
Property 3,368
Identifiable Intangible Assets 280
Deferred Income Taxes and Other Assets 2,201
Total Assets 22,280
LIABILITIES & EQUITY
Notes Payable 325
Accounts Payable 2,317
Accrued Expenses 4,296
Long Term Debt-Current 142
Current Liabilities 7,080
Long Term Debt 937
Deferred Income Taxes and Other Liabilities 1,480
Total Liabilities 2,417
Common Stock 6,773
Retained Earnings 6,010
Owner's Equity 12,783
Total Liabilities & Equity 22,280
10. Projections
EFN = Change in Notes Payable = $251 M
ROIC for projections = NOPAT/Invested Capital = 22.5%
11. Financing
Sources of Funds
Using information from 2015 financial reports.
2012 2013 2014 2015
Cash, cash equivalents, short-term investments X X X
Asset from discontinued operations X
Non-interest bearing liabilities X X
Long-term debt X
Equity X X X X
12. Capital Structure & Costs
Beta Comparison
Market Rate 1
Nike 0.9
Under Armour 1.2
Lululemon 1.1
Using information from 2015 financial reports.
13. Capital Structure & Costs
Equity Valuation
CAPM
Cost of Equity
Nike 6.9%
Under Armour 8.7%
Lululemon 8.1%
Using information from 2015 financial reports and cost of equity calculations are approximate.
14. Capital Structure & Costs
Capital Structure
Weighted Average Cost of Capital Calculation
WACC 6.5%
Risk-free rate 1.47%
Default Premium 0.78%
Cost of Equity 6.9%
Using information from 2015 financial reports. Risk-free rate is based on US 10-year treasury bonds
and Nike default premium is based on 2.25% rate for 10-year Nike bonds.
2013 2014 2015
Debt 11.1% 11.3% 9%
Equity 88.9% 88.7% 91%
17. Dividend Policy
Payout Ratios and Repurchases
Using information from 2015 financial reports and *stock repurchases as of 9/2012.
2011 2012 2013 2014 2015 Total
Ratio 26.0% 27.8% 28.4% 29.7% 27.0%
Dividends Paid 555M 619M 703M 799M 899M 3.575B
Stock
Repurchases*
1859M 1814M 1674M 2628M 2534M 10.509B
18. Dividend Policy
Repurchases & Dividends Compared
NIKE pays at regular intervals to its shareholders out of its after tax profits.
Shareholders pay taxes on distributed dividends
NIKE repurchased its shares from the marketplace, reducing the number of
share outstanding and increasing its EPS and ROE, which are measures of
profitability.
The goal is to increase the share price over time.
Shareholders will receive a return and taxation today plus an uncertain
return and tax sometime in the future.
We can conclude that Nike values shareholder returns.
19. Stock Value
Comparison Before & After Stock Split
Before After
$77.6B $77.6B
857M 1.7B
$90.60 $45.67
$101.67* $53.09^
Value of Equity
Number of Shares
Value Per Share
Closing Price
Using information from 2015 financial reports. *As of 5/31/15. ^As of 6/28/16.
20. Valuation Comparison
Value Line Analyst
“This neutrally ranked stock is expensive. Long term investors should wait for
shares to pull back before committing their capital.”
Fidelity
“Nike suffers multiple target cuts, but analysts remain bullish.”
Citigroup
“Rates Nike a buy, but lowered its target price from $61 to $75.”
Jeffries
Although there has been a slowdown in the basketball business, “the strength of
the new KD and Kyrie shoes and going health of Jordan, ‘gives’ us more
confidence in the category.”
21. Looking Forward
Challenges
Inventories
Inventories have risen. consumers are not spending as much on apparel
and stores that sell Nike merchandise faltering, i.e., Sports Authority’s
bankruptcy and Macy’s struggle with driving traffic to its stores.
Competition
Women’s Leisure is getting more crowded. LULU
Curry (UA) beating LeBron (NKE) off the court in shoe war.
