The 2007 numbers are out for Nike
Old brand, new profits
Converse's recent success was the highlight of the call. The brand saw 23% revenue growth for the year, helping to drive Nike's total subsidiary growth by 16%.
Leading the charge was Converse's legendary Chuck Taylor All-Star franchise. The first "All-Star" was produced in 1908 -- that's right, nearly 100 years ago -- but the shoe's popularity didn't take off until Chuck Taylor began promoting it in 1923. Though Taylor was no Michael Jordan on the hardwood, he showed his marketing prowess by suggesting that Converse put an All-Star patch on the ankle to give it added support. Converse not only did so, but also put Taylor's name on the patch. The rest is history.
The fourth quarter of fiscal 2007 was the "biggest global sales quarter ever for Converse," according to CEO Mike Parker. The franchise is seeing success with "every model," from in-house designs to those customized by consumers.
Parker predicts another successful year for Converse as the brand continues to expand internationally. The company is already witnessing "a tremendous customer response" from its newly opened London location. To celebrate the All-Star's 100th anniversary in 2008, Parker said some "special concepts" are in the works. New designs and continued expansion should help Nike's subsidiaries pursue double-digit revenue once again in the coming fiscal year.
The Swoosh still soars
Let's not kid ourselves, though. Nike's subsidiaries compose only about 15% of the company's total net revenue (according to fourth-quarter 2007 data). To truly dominate in 2008, the Swoosh must be at the top of its game. Fortunately, it is.
The call left me highly impressed by the level of detail Nike goes into to thump the competition. Coaches always say that in order to be good at the big things, you have to work on the little things. Nike has that down to an art.
For example, Nike President Charlie Denson discussed the recent launch of the Mercurial Vapor soccer shoe, which is now lighter than previous editions. Big whoop, right? Wrong. Here's Denson:
Let me explain that in layman's terms, we made the shoe lighter. That means on average, over a distance of 10 meters, the Vapor was 0.05 of a second faster than our competitor's shoe. To a player at this level, the difference means an advantage of the length of one football shoe. That is huge in soccer.
Denson indicated that future orders for Nike soccer shoes are currently up by "strong double digits." The new shoe is ready well in advance for the Euro Championship games in 2008, as well as the upcoming Olympic Games in Beijing, China.
Dominating the Chinese market
Aside from attention to detail, the other quality I love about Nike is its competitive drive to excel at everything. In the call, executives pointed to its No. 1 position in worldwide golf apparel, its top-3 position in U.S. golf drivers, its No. 2 brand in running shoes in Germany (which represents "half of the running business on the continent"), and its absolute domination in the Chinese market. In fact, Nike's lead there widened by another 4 percentage points this past year.
Nike's 2007 revenue increased by 29% in China, and Denson believes that as early as 2009, the country will represent Nike's second-largest market. In the second-quarter conference call, management revealed bigger spending on branding in China. The "Just Do It" campaign there, tied to the upcoming Olympic games, is expected to pay big dividends in the coming year. It's hardly a stretch to predict that Nike's lead in the country will only widen in fiscal 2008.
Nike is a winner, period
We can talk about any number of things regarding Nike:
- The solid growth of its Niketown retail concepts.
- Its efforts to drive greater growth from U.S.-based malls and retailers like Foot Locker
(NYSE:FL)and Finish Line (NASDAQ:FINL)by helping these companies stand out from their rivals.
- The efficiency of its inventory management system, particularly in the United States.
But the one quality that always stands out with Nike is its winning spirit. The company simply knows how to succeed. For prospective investors seeking companies to hold for decades to come, it's hard not to include Nike on that list.
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