Nike company compared to other shoe companies

Nike is an American multinational company that creates, develops, produces, and sells clothing, accessories, footwear, and equipment on a global scale. The Greek goddess of triumph is the source of the name ""Nike."" Under the name Blue Ribbon Sports, it was established on January 25th, 1964. Airforce 1, AirMax, Nike Plus, and Nike Golf are among the goods offered under this brand (Oh & Doo, 2015). Oregon's Beaverton is home to the company's headquarters. It is the largest global supplier of athletic wear, footwear, and other sporting goods. Bill Bowerman and Phil Knight founded it at the University of Oregon. The company started out by selling Japanese shoemaker ASICS, formerly known as Onitsuka Tiger. Most of the shoes were sold out on Knights automobile at first. In the first year of business, the enterprise sold 13, 000 pairs of running shoes and earned $8,000. In the subsequent year, the company began hiring full-time employees and made 0000 in sales. The company opened its first store I 1966 in Santa Monica, California and when sales increased, Nike expanded to Wellesley, Massachusetts.

In 1971, the relationship of Blue Ribbon Sports was on the verge of ending. It began its own footwear line called Swoosh and hired John Brown & partners in 1976 to advertise it. In 1977, the advertising agency created a new brand ad ‘There is no finish line’ for Nike. By 1980, approximately half of the USA share of the athletic shoe market had gone to Nike. In the same year, the company went public. Since 1988, Wieden-Kennedy was hired as its ad agent. The agency came up with “Just Do it” slogan for the market campaign on 1st July 1988. Throughout the 1980s, Nike expanded its products to incorporate other regions and sports around the world. In 016, Phil Knight stepped down as the chairman of Nike.

Nike Acquisitions

The company has acquired multiple footwear and apparel companies in the past. Its first acquisition was in 1988 when Nike unified with Cole Haan. In 1994, Nike purchased Bauer Hokey and Hurley international in 2002, a manufacturer of apparel. In the following year, Nike acquired Converse, the manufacturer of Chuck Taylor All Stars sneakers, at a deal worth 308 million dollars. In 2004, Nike acquired Starter and Umbro. However, after that, Nike began divesting some of its subsidiaries to refocus on its core business lines in 2000s. To do so, it sold Carter in 2007 and Bauer Hokey in the following year. In 2012, Nike sold Umbro and Cole Haan in 2013. By 2013, Nike had only two subsidiaries; Convers Inc. and Hurley International.

Reebok

Reebok is a global apparel and footwear brand that dates back to 1958 in England. It was formed as a companion to J.W. Foster and Sons in Bolton, Greater Manchester. It migrated its headquarters to Canton, Massachusetts. Presently, it has regional offices in Montreal, Mexico City, Amsterdam and Hong Kong. 2005. The main products of Reebok are CrossFit, running and fitness footwear and clothing. The company is popular for sponsorship of major sports such as Les Mills, Spartan race, Ultimate fighting Championship (UFC) and CrossFit. Reebok announced that it will move the headquarters to Boston in November 2016 as a strategy of moving to an urban environment with a high population of desirable millennial workers and clarify its roles to the USA offices.

History

Reebok Company was founded by Joe foster and Jeff Foster. The name refers to the African Antelope among Africana. In 1979, Paul Fireman, the chief of an International Sneaker trade show signed a business deal of licensing and distributing the Brand in the USA. In the 19080s, the company expanded to aerobics, running, tennis shoes 1982, it introduced Reebok freestyle so that was specifically designed for women. In 1985, Reebok went public on the New York Exchange ( Keyser, 2015). At that time, the company had begun to introduce sports clothing and accessories as well as a new line of children’s athletic shoes called Weebok. At the end of 1980, Rebook made a sales worth one billion dollars. Carl Yankowski replaced Robert Meres as a CEO in 1998. Yankowski had stepped down to join another company as an executive in the following year and Paul Fireman took over as a CEO. Reebok signed a deal with the NFL to manufacture and sell NFL merchandise such as footwear and uniforms for the participating 32 teams in 2000. In the following year, it signed another deal to manufacture the uniforms and footwear for NBA for ten years in 2004.In 2001, Jay Margolis became the company's president but resigned in 2004. The leadership of Reebok went back to Paul Fireman. Reebok became a National hockey League Sponsor in 2004

Acquisitions

Reebok was acquired as a subsidiary of Adidas in 2005. However, the deal permitted the two companies to retain their separate names. Adidas acquired all the outstanding shares of Reebok in a dealt worth 3.8 billion dollars (Schmid, Dauth & Kotulla,2011). However, the deal saw Adidas replacing Reebok as the official supplier of Uniform and Apparel for NBA in 2006. In 2006, Paul Harrington replaced Paul Fireman as the CEO of Reebok. In 2010, Rebook partnered with CrossFit Fitness Company and became a sponsor of CrossFit Games. Thereafter, the company debuted the delta symbol of Crossfit on its fitness apparel line. In 2013, Rebook announced a partnership with Les Mills a fitness and team training programs operating in 80 countries. The deal encompassed manufacture and distribution of Reebok clothing and footwear and their integration into the fitness programs and media marketing. The company announced the replacement of its delta logo with a vector sign. The debate assign could represent the physical, mental and social positive change

Profitability Ratios

Nike (as by May 31 from 2012 to 2016)

The return on investments (to be tabulated)

From the table, it can be established that company’s Gross profit margin improved from 2015 to 2016 and dropped significantly from 2016 to 2017 on the other hand, the operating profit margin improved from 2015 to 2016 and deteriorated from 2016 to 2017. The net profit margin improved from 2015 to 2016 and 2016 to 2017. The return on equity and return on assets of Nike increased from 2015 to 2016 and 2016 to 2017.

Source: Stock Analysis On net.

Reebok Financial Ratios

The financial ratios indicate that the gross profit margin of Reebok increased from 2011 to 2013 and from 2014 to 2015.The net profit margin and operating profit margin had a similar trend.

Critical Reebok Decisions that influenced it

In 2005, Reebok merged with Adidas in a deal worth 3.8 billion dollars. At the time of the merger, Adidas was the second largest manufacturer of sports products in the world with capital of approximately nine billion dollars while reebok was the third largest maker of sports apparel and equipment with capital of four billion dollars. The deal was completed in 2006, leaving the merger with a value of 12 billion. Since the merger, the share prices of the company have depicted an increasing trend from one year to another.

Critical Decision of Nike that influenced it

Nike Management team confirmed that the company had made a deal with Amazon to sell its products on its commerce platform. The company had earlier refused such deal for fear of counterfeits and unsanctioned sales of its products. After reporting that it was making a major deal with Amazon, Nike reported an increase in its share by 7 percent which was higher than the projected increase by Wall Street (Lauren, 2017). The earning per hare rose by 60 cents in the fiscal fourth quarter against the expectations of 50cents by Wall Street. On the other hand, the revenue rose to 8.68 billion while Wall Street had projected 8.63 billion rise.

Analysis of financial statements

Nike income statement

Reebok/Adidas income statement

From the tables, it can be established that the two companies experienced a general increase in revenue and net income between 2015 and 2016.However, the revenue increase in Reebok was higher than Nike. Similarly, the increase in net profit was higher in Reebok than Nike, which indicates that it is lagging (MarketWatch, 2017). To increase its income, Nike should embark on product diversification (Cavalcanti et al, 2015). For instance, it can expand its product lines to include things such as bags and seat covers. By increasing the variety of products that it sells, Nike can increase the number of customers that it has hence increase its revenue.

Analysis of Nike’s balance Sheet

Nike Balance Sheet As at 31 May 2016 (Amount in $)

The balance sheet indicates that Nike has more inventory than cash and its equivalents which indicates that the company has a lot of money tied in the inventory. The low proportion of current held as cash indicates that Nike has little protection in case the business environment turns hostile (NASDAQ). The amount of receivables is also high which indicates that Nike has low efficiency in its collection of debts. However, given that the assets are more than the liabilities, Nike is in a decent condition.

Reebok/Adidas Balance Sheet in 2015

Similar to Nike, reebok’s cash and equivalents are significantly lower than the inventory, indicating that more money is held in inventory. The rate of conversion of stock is also low in Reebok similar to Nike (Amigobulls.com). However, the assets are more than liabilities, which indicates that the position of Reebok is also healthy.

References

AmigoBulls.com. Adidas Balance Sheet - Annual (OTCMKTS:ADDYY. https://amigobulls.com/stocks/ADDYY/balance-sheet/annual

Cavalcanti, D. V., Tiago, V., Mohaddes, K., & Raissi, M. (2015). Commodity price volatility and the sources of growth. Journal of Applied Econometrics, 30(6), 857-873.

Keyser, A. J. (2015). Sneaker Century: A History of Athletic Shoes. Twenty-First Century Books.

Lauren, T. (2017, June 29). Nike Tops WallStreet Expectations; Confirms Deal with Amazon.CNBC. Retrieved from; https://www.cnbc.com/2017/06/29/nike-reports-fourth-quarter-earnings.html

MarketWatch. (2017)Adidas AG ADR. Accessed: Dec 10, 2017

Retrieved from:https://www.marketwatch.com/investing/stock/addyy/financials

Morning Star. (2017). Adidas AG ADR ADDYY. Retrieved fromhttp://financials.morningstar.com/ratios/r.html?t=ADDYY

NASDAQ.Com Nike Company Financials. http://www.nasdaq.com/symbol/nke/financials?query=balance-sheet

Oh, S. J., & Doo, I. C. (2015). Analysis of Relevance of Myth-motif Brand'Nike'using Big Data of Portal Sites, Twitter and Blogs. International Information Institute (Tokyo). Information, 18(5 (A)), 1555.

Schmid, S., Dauth, T., & Kotulla, T. (2011). The Acquisition of Reebok by Adidas. In Fallstudien zum Internationalen Management (pp. 713-731). Gabler Verlag.

Stock Analysis On Net.(2017).Nike Inc.(NKE).Stock Analysis. Accessed: Dec 10, 2017

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