NIKE, Inc. (NKE): A Deeper Look at This Retailer’s Performance

The bounce-back is largely due to successful footwear launches and the ongoing strength of running and basketball for Nike. I suspect the former’s success is due to the popularity of new product launches kicking in while NIKE, Inc. (NYSE:NKE)’s success in basketball shoes is partly a function of its significant investment in sponsoring players that achieved high profiles in the NBA season.

Where Nike Is Strong

Another key point to note is that outside of North America, apparel sales are not doing well at all. I’ve stripped out North America from the chart below to demonstrate this.

I was surprised by this because a company like V.F. Corp has been doing well internationally with the North Face and Vans shoes. The ongoing onslaught of the shift towards casual attire (you can tell I don’t like it) appears to be gathering pace.

My take on this is that consumers are becoming more specialized in their casual attire. For example, if you want to look like a skateboarder while driving your 4×4, buy Vans. Climbing Mount Everest before a trip to a coffee shop? Buy a North Face jacket. As a consequence Nike could be losing its appeal as an all purpose outwear brand.

Where Nike is not losing its appeal is in sports like basketball. The sports strength in North America goes some way in explaining why it is doing particularly well. In order to grow internationally it will have to connect emotionally with the sports that are popular in various markets and this requires marketing and sponsorship dollars.

Where Next for Nike?

The recent results were ahead of estimates, but NIKE, Inc. (NYSE:NKE) still has a lot of work to do in solving its problems in China, and there is a sense that the easy growth is over in the country. Moreover, strength in North America is great, but investors should not assume that this will translate internationally.

Having mentioned revenue growth in the high single-digits with earnings growing in the mid-teens for 2014, Nike will have to confirm this at the next set of results.

The article A Deeper Look at This Retailer’s Performance originally appeared on Fool.com and is written by Lee Samaha.

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