Friday, September 21, 2007

Nike Posts 51% Earnings. Is that really Good?

Nike (NKE) posts a 51% increase in earnings on the basis of excellent increases in off shore sales and a one time free pass from the taxman . Europe, Asia, even places that supposedly do not have money managed to buy lots of Nike product. US numbers are stuck in the muck. The US market is much too large for that problem to continue. From the conference call transcript available on I did not really hear anything that would fix that.

So the question becomes is Nike a successful American brand who leveraged international trade opportunities? Or is Nike a global brand and US sports culture is tone deaf to international trends?

Nike does not get Soccer like Adidas and other firms (By the way its called football outside of North America). They have decided to punt out hockey equipment because it does not meet their growth needs. Hockey is played in countries or regions that have cold and ice. Why did management not understand that point at the outset?

Hence the challenge of a global sports wear and equipment brand. Local issues are very important. Just look at cars around the world. They are not all the same. If they cannot get US sales to fire up then we need to rethink the overall global brand.

In the meantime why is the sum total of accounts receivable and inventories equal to the quarters revenues. The turns are too slow. Will Nike have a nice US Christmas? Cash and equivalents are up $1.1 billion to $2.8 billion. Thats approximately 10% of the market cap represented by cash. The stock is near its 52 week high. If Nike wants to take the stock up after this announcement then take a page from MacDonald's playbook and boost the dividend.