How Nike Manages to Constantly Beat on Earnings

Learn how Nike maintains a sound track record for revenue and profit in a competitive market.

Mar 30, 2014 at 12:46PM

A few companies lead the global sports apparel market, and they succeed thanks to their innovative products and their strong branding. With the World Cup in Brazil coming up this summer, these organizations have an opportunity to improve their sales and revenue through adequate promotions. In this context, Nike (NYSE:NKE), the world's largest sporting-goods corporation, has a sound track record for revenue and earnings as it has beaten Wall Street's expectations for several consecutive quarters.

Several factors contribute to the company's success. Even while competing with giants like Adidas AG or Puma SE, Nike has constantly managed to deliver solid bottom-line and top-line results. 

Consistent success
In its fiscal-2014 third-quarter results Nike showed a 13% increase in revenue to $6.97 billion, and it once again beat Wall Street's estimate of $6.68 billion. Plus, its profit rose 3% from the same quarter last year to $685 million. Nike's success makes sense considering the growth that it has had in Europe and the United States. In Western Europe, the company increased its revenue by 19% as it got ahead of major competitor Adidas. In Central and Eastern Europe, Nike's sales grew by 17%.

Nike has managed to expand because of brand differentiation and promotion. The company retains almost 60% of the sports footwear market in North America. A big contribution to its astonishing popularity in that region comes from the Air Jordan brand, made up of basketball apparel designed and produced by Michael Jordan. Moreover, one of Nike's subsidiaries, Converse, has performed much better lately. Through targeted promotion, Converse has managed to increase its revenue by 16% to $420 million.

In regard to its performance in China, it seems like the company is overcoming the difficulties caused by excess inventory and weak sales. Nike recently managed to generate revenue and profit in this emerging market as it increased its sales by 7%.

Major competitors
Adidas, the world's second-largest company in the sporting goods market, has put pressure on Nike in Europe and the U.S. as it competes for market share. However, it has lately lost ground to the American company in the European market. Moreover, it experienced setbacks due to currency weakness. Still, the German company plans to improve its operations in China by offering better-targeted advertisements and opening a concept store.

Puma is another major player in the market. Nike has also managed to surpass this organization thanks to its strong footwear innovation and branding. In the past few years, Puma has strongly branded itself as a sports lifestyle-fashion company. However, the results of this strategy have been poor, which has allowed Nike and other competitors to move further ahead.

From now on
Nike could have potential for future growth. This year, it can increase its top-line through sales of its innovative World Cup soccer shoe, the Nike Magista, which it has engineered to enhance the player's experience and performance in the field. Moreover, the company has set a high mid-term goal as it targets revenue of $36 billion in fiscal-year 2017. However, weak currencies in China and emerging markets could damage Nike's revenue and growth this year.

Nike must also take into account its rising competitors. One of these is Under Armour (NYSE:UA), a quite-popular American sports-apparel company. This organization has a strong and appealing brand and it specializes in technological innovation that enhances athletic performance. In addition, it shows consistent overall expansion year after year. The company might keep growing considerably, given that projections call for revenue growth and earnings-per-share growth in 2013 of 21.9% and 23.6%, respectively.

Final foolish takeaway
Nike has managed to consistently beat earnings estimates because of its innovation, differentiation, and marketing strategies. Its brand has surpassed the successes of major competitors like Adidas and Puma. With the World Cup coming up, Nike could potentially enjoy more success this year. In regard to upcoming years, the company has set an interesting mid-term goal and it can expand its presence in emerging markets. For example, increased market share in China could provide serious growth for the company. Moreover, Nike must be aware of Under Armour's rapid growth and prepare for a more intense competition with this organization's appealing brand. Overall, the company's strong, positive track record and potential future growth makes it a stock worthy of consideration.

3 stocks to own for the rest of your life
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Victoria Zhang has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers