MARKET WATCH: A Few Thoughts on Nike’s Quarter
Jeff Harbaugh
- September 26 2008
- 593 views
- 8 comments
A couple of days go, Nike put out a press release for their first quarter ended August 31. It’s not the whole quarterly report, so I can’t delve into any footnotes. They sold, uh, a whole bunch of stuff and made a lot of money. I’ll deal with the details when the 10Q is filed. Here’s the link to the press release if you want to review the summary financial statements. You don’t need me to spew the numbers back at you.
As I read the press release, I was struck by the fact that a few years ago, I wouldn’t have bothered. I mean, who cared about Nike in the surf, skate and snowboard businesses? They weren’t a factor and they played in a market that just didn’t seem relevant to us. Every time they tried to get into the industry, we went to their parties, drank their beer and that was it. What’s changed? They bought Hurley and did skate shoes right is the obvious answer, but I want to suggest it’s more than that.
Like Nike we, as an industry, are more and more about shoes and apparel.That’s where the growth opportunities are and where the money can be made. Like Nike, we want to use the appeal of sports and athletes to sell product to non participants. Like Nike, we are concerned with branding and fashion trends.
It sounds like we’re increasingly competing with Nike. Yikes! Nike sales were $5.4 billion for the quarter. Double yikes. Even traditional action sports companies we think of as huge are pretty tiny in this new sandbox we play in. It’s either audacious or maybe humorous to think about some of our companies
competing against Nike or at least in the market they are in. But if you believe you are or might be, you’d better spend some time asking how (and maybe why) exactly you’re going to do that. I’m guessing the skate shoe people have been doing that for a while now.
Related to this is the breakdown of Nike’s revenue. Their total footwear, apparel and equipment sales for the quarter were $4.777 billion (Nike has revenue of $655 million from “other” businesses). Of the $4.8 billion, only $318 million, or 6.7% came from equipment. Footwear was 55.6% with apparel accounting for 37.7%. Just for fun I went back and reviewed their last annual report (10K) to see if they told us their gross margin or pretax profit on equipment. Doesn’t seem to be there. Too bad.
My point is that equipment seems to be the tail that wags the dog. Isn’t that where we’re going, too?
Jeff Harbaugh is a consultant for the action sports industry and works with companies to identify and focus on critical business issues and opportunities fundamental to the bottom line.
For more information, visit www.jeffharbaugh.com.
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September 28th, 2008 at 5:51 pm
the only equipment you need to purchase to play most mainstream sports is a ball
September 29th, 2008 at 7:05 am
people arent going to wear big, bright irnic high top sneakers forever. I see Nike’s dominance in the market waning a bit in the coming years. Theyre too heavily branded to smoothly transition into a period where people are looking for more nameless sportswear.
September 29th, 2008 at 7:16 am
Yeah, no style is forever. I don’t think Nike ever expected to move their earnings per share with whatever they earn in the skate business. But it has givenn them a certain credibility and exposure with a segment of the market they hadn’t had much success with. And of course, like every brand in the space, they hope that credibility extends to the broader market.
September 29th, 2008 at 3:09 pm
I am wearing Nike skate shoes right now. You know why? because when I played basketball, I always had a pair of Nikes. When I played tennis, their tennis shows fit me the best. When I go skate, am I going to necessarily avoid NIke when I know and trust their product because we have a tendency to have a them against us attitude in the core action sports market? Hell no. This is why Nike will never go away. How many skaters these days play other sports or atleast have an interest in them? (retorical question)
September 30th, 2008 at 9:37 am
Jeff, good reporting. Two questions, just curious:
-Do you rock any Nike action sports footwear or apparel?
-Do you own Nike stock?
September 30th, 2008 at 10:54 am
Don’t own any Nike stock unless it’s through a mutual fund I have. If I did own it, I would either not write about it or say so. Don’t do any business with them. Don’t even think I own any Nike product. Good questions though.
December 18th, 2008 at 8:39 am
nike is a core sports shoe.
you ever really skated a pair of nikes.
who has one of the illest skate teams in the bussiness.
oh yeah nike.
nike is a good,comfortable skate shoe that lasts for a long period of time.
you wanna hate,hate then.
fuck haters.
December 18th, 2008 at 8:57 am
TK,
Just so you know, what i wrote was on Nike’s last quarter- not the one for which they released some numbers yesterday. The timing of your post just made me think you might be confused about that. Also, I’m not going to delete your post, but help me out and try to make some point- not just vent.
thanks,
J.