Nike's Firm Performance and Competitive Advantage

On Dec. 20, 2011, Nike released their financial results for the second fiscal quarter of 2012 and let's just say that their performance continues to "Just Do It".  Reported highlights from their second quarter financials are that revenues are up 18 percent to $5.7 billion (up 16 percent if you exclude their currency changes), diluted earnings per share are up 6 percent to $1.00, worldwide futures orders are up 13 percent, and inventories are up 35 percent.  Obviously the rising inventory levels are a slight cause for concern, but besides that Nike continues to set the bar in the sports apparel industry.  “Our strong second quarter results demonstrate that the NIKE, Inc. portfolio is a powerful engine for growth,” said Mark Parker, President and CEO, NIKE, Inc. “We’re able to accomplish this by staying focused on what we do best – deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders. Going forward we’ll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers.”

Nike is accomplishing this growth due to both their temporary competitive advantages, such as their current distribution channels and satisfaction level with consumers, but in most part its due to their sustained competitive advantages.  Nike's brand is one of the most recognized around the globe (BuisnessWeek named it the 31st ranked brand in the world), it's research and development department continues to innovate (most recently continuing to expand on their Apple platformed Nike+ line of athletic electronics by introducing the physical activity-monitoring wristband, the Nike+ FuelBand), and their incredibly effective marketing (the "Just Do It" campaign to their sponsorships with some of the top athletes in the world: Tiger Woods, LeBron James, Lance Armstrong, and Cristiano Ronaldo to name a few).  The gap between Nike's $2.23 billion in net income and their closest, publicly traded competitor Adidas's $854.56 million is so staggering that it's hard to imagine Nike being unseated by anyone in the near future.

Below are some simple accounting measures of Nike's competitive advantages.

http://www.investorpoint.com/stock/NKE-Nike+Inc.+Cl+B/key-ratios/