Nike

Nike on the Path to Becoming a Luxury Brand

Nike

Nike (NKE) keeps setting some great trends as they are generating outstanding returns. The company has entered FY 2016 with a bang. The earnings report for the second quarter of FY 2016

that was rereleased on December 18th, showed that Nike had achieved a rise in revenues of 15 percent on a year over year basis. Thus, the company generated $7.4 billion in revenues, while their profits have increased by 23 percent to $655 million.

These massive increases in the company’s results are because Nike has made a shift in the direction of high-end premium apparel. This is one of the most efficient and effective methods for a luxury brand to make a profit. Premium is precisely the term Nike’s Chief Financial Officer used to characterize the brand and pricing strategy Nike is implementing.

Late Thursday, Nike’s stock did slip somewhat, during aftermarket trading. However, this was because investors were reacting to the lowest increase in future order rates in the previous four quarters. This year, it appears that the growth pace of future orders hasn’t been quite as impressive as the company achieved during the same quarter of the previous year, which was largely generated by the World Cup.

However, Nike has been successful in outperforming and outdoing analysts and their expectations, which were pretty low. The company proved that Nike was still relevant and their stock could still grow on the market. Despite slower growth trends, Nike has managed to set itself up as a luxury premium brand.

During the Q2 financial results call, the chief financial officer of Nike, Don Blair, said that it was a trend that would continue and it was this along with a continuous stream of innovation and Nike’s power as a brand that is keeping it in the strong position it’s in now. Nike keeps succeeding in getting consumers to part with their money and buy its premium line of footwear and apparel.

Nike has also said that they are developing strategies that will help them beat their rivals, such as Under Armour, Adidas and Puma, allowing them to establish themselves as a premium brand. The plan includes various strategies and also includes a certain line of products the company is focused on.

Nike recently launched the 18th version of the Air Zoom Structure. But this time, the company took a different approach and offered NikeID customization on these trainers which could be done online. Thus, consumers can choose the color, the sock liner, the text and various other features. The price on Nike’s online stores starts at $120, with the customizable version selling for $170.

The Tech-Fleece clothing range has been expanding and the snug factor has been increased. Now, it combines goose down filling with fleece. Wind-runner tech fleeces and parkas are selling for $350.

The LunarGlide 6 trainer, inspired by the walk on the moon, was launched in summer. The preferred choice of Shalane Flanagan, a US runner, retails for $339.

Nike stated that there is a bullish trend for their stock on the market, especially taking into account the FlyKnit performance. Mamba Moment, another running shoe they added to their lineup, is a Kobe Bryant tribute and comes with a FlyKnit top that is light weight and features multiple colors. The purple and green shoe is selling for $245.

Nike is also placing a lot of focus on the retail experience and understands how essential it is to provide an excellent customer experience from start to finish.


About

Eric Hanson covers Software and Computer Analytics companies within the Business Services group. Eric was named by Forbes in June 2013 as one of the best brokerage analysts in the Consumer Discretionary sector.


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