NIKE

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NIKE
Presented by Irana Kerimova Terry Chang Luis
Meza Joe Ocasio Omar Abu-Adus Amy Ta
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Mission Statement

• To bring inspiration and innovation to every
  athlete in the world.
• If you have a body then you are an athlete.

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The Swoosh

• Created by Caroline Davidson in 1971.
• It is the wing of the Greek Goddess NIKE.
• Spring of 1972, the first shoe with the NIKE
  SWOOSH was introduced

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A look into Nike

• Founded in 1971 by Phil Knight and Bill Bowerman.
• Bill Bowerman, had the desire for better quality
  running shoes clearly influenced Knight in his
  search for a marketing strategy.
• Began as a small distributing outfit located in
  the trunk of Phil Knights car.
• Knight devised the Nike name and trademark Swoosh
  in 1971.

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Nike Products
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Phillip H. Knight

• Founder of Nike
• Chairman of the Board, President, Chief Executive
  Officer
• Director since 1968
• Served as President from 1968 to 1990, and from
  June 2000 to present. Prior to 1968

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Donald W. Blair

• Chief Financial Officer
• Vice President
• Joined NIKE in November 1999.

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Mark G. Parker

• Divisional Vice President, 1987.
• Corporate Vice President in 1989.
• General Manager in 1993,
• Vice President of Global Footwear in 1998.
• President of the NIKE Brand in March 2001.

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Tom Arndorfer

• Chief Financial Officer of Nike USA.
• Vice President.
• Director of Global Strategic Planning for Nike.

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Charles D. Denson

• President of the Nike Brand
• Employed by NIKE since February 1979.
• Director of USA Apparel Sales in 1994, divisional
  Vice President, US Sales in 1994

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Nike Worldwide Sales Growth in 2003
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Financial Ratio Analysis

• Growth Ratio (EPS)
• Strong 19.30
• Industry 8.70
• Financial Condition (Quick)
• Satisfactory 1.5
• Industry 1.7
• Current P/E Ratio
• Weak 23.4
• Industry 27.3

• Profit Margin (net profit)
• Strong 7.2
• Industry 6.2
• Return on Assets (ROA)
• Strong 11.0
• Industry 7.3
• Management Efficiency (rev/emp)
• Strong 483,000
• Industry 312,000

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Nike Stock

• Current Share Price 73.25
• Daily Trading Volume 1.162 bi
• Market Capitalization 19.27 bi

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Holding Period Return

• 2004 2003 2002 2001
• (12/31)
• 0.367 0.0517 0.320
  -0.030
• (expected)
• Considering the inconsistency in the past three
• years, the stock can be considered a fair risk.

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Free Cash Flow Cost of Equity

• 2004 2003 2002 2001
• (expected)
• 169.7 136.6 326.2
  65.8
• (mil) (mil)
  (mil) (mil)

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Risk Analysis

• Beta
• 2003 0.707
• 2002 0.856
• 2001 0.960

• Unlevered Beta
• 2003 0.488
• 2002 0.592
• 2001 0.673

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Cost of Capital Optimal Capital Structure 2003

• Weighted Equity 0.594
• Weighted Debt 0.405
• Cost of Equity (Ke) 0.135
• Cost of Debt (Kd) 0.052
• WACC 0.094

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Required Rate on Equity

• Ke (DCF model) 0.2618
• Ke ( CAPM) 0.2598
• The company is currently under-priced because
  Ke(DCF model) Ke(CAPM)

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Capital Structure
WACC 2003 0.938
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M M Proposition Model 3
Nike appears to fall into model 3 of the M M
propostion the WACC falls from 2000 to 2001,
but rises from 2001 to 2002, while firms
value heads in the opposite direction.
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Market Efficiency

• Company Specific
• SP Says Accumulate Nike
• March 19, 2004- WEAK form

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Market Efficiency

• Non Company Specific
• Blasts come amid heightened security.
• March 11, 2004- does not fit any model of
  market efficiency.

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5- Year Stock Price
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Hold, Sell, or Buy

• NIKE, Inc. Analyst Ratings
• Average brokerage recommendation
  is Strong-Moderate Buy.

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Conclusion

• Financial Condition Investment Returns are both
  strong in comparison to industry.
• Profit Margins and management efficiency are both
  higher than industry average.
• Price ratios are not as strong as industry or SP
  500
• Expected Holding Period Return is smaller in 2003
  comparison to 2002, however it is expected grow
  in 2004 to a number significantly higher than the
  previous three years.
• Equity is greater than debt
• Stock is currently under-priced.
• Capital Market Structure is stable.
• Recommendation BUY and HOLD

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Just do it!