Nike's $27 Billion Growth Goal

May 20, 2010
Company banks on strategic partnerships and e-commerce to double business over the next five years.

Nike Inc. plans to build off of momentum gained in emerging markets and increasingly popular brands to boost revenue by $27 billion over the next five years. The company announced its goal on May 5 during its first investor meeting in three years.

CEO Mark Parker highlighted the growth of the company's Converse and Action Sports brands as examples of Nike's growing portfolio. The company purchased Converse in 2003, and since then the brand's revenue has grown to nearly $1 billion, up from $300 million when Nike first acquired the footwear company.

The company's fastest-growing Nike brands are within the Action Sports group, which produces shoes for more nontraditional sports, such as skateboarding, snowboarding and surfing. Nike bolstered its market share in the action-sports sector when it purchased surfing and skateboarding apparel company Hurley International in 2002. Parker said Hurley has outperformed "everybody else in its market," and the company is "running a very powerful offense in the action-sports marketplace," according to a transcript of Parker's speech.

The company plans to build on this growth by creating strategic partnerships, Parker said. He noted that the company is entering some unconventional partnerships that include NASA and street artists.

Nike Inc.
At A Glance

Nike Inc.
Beaverton, Ore.
Primary Industry: Apparel
Number of Employees: 34,300
2008 In Review
Revenue: $18.63 billion
Profit Margin: 10.11%
Sales Turnover: 1.50
Inventory Turnover: 4.49
Revenue Growth: 14.09%
Return On Assets: 17.62%
Return On Equity: 26.81%

Emerging markets also will play a large role in Nike's future growth. Through the third quarter, Nike's revenue in China is $1.3 billion, which is nearly as much as the company generated in China for the entire 2008 year, Parker said. The company plans to accelerate its marketing efforts in smaller towns throughout China after achieving much success in the larger cities.

The company expects low double-digit growth through 2015 in its developing market categories of Greater China and Central and Eastern Europe, according to Don Blair, vice president and chief financial officer. These emerging markets are expected to contribute $3 billion to $3.5 billion in annual revenue over the next five years. The company projects product consumption in the BRIC countries (Brazil, Russia, India and China) will grow at a 15% annual rate.

E-commerce is another area that represents significant growth potential, Parker says. Nike is taking advantage of e-commerce opportunities through online storytelling and Nike+, a device that works with the iPod to provide athletes with exercise data, such as miles traveled or calories burned.

"We have a lot of breakthrough ideas on our workbench here at Nike," Parker said. "This is a big priority for us and a major part of our future."

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