There were many important details revealed by Nike (NKE +0.83%) management in the company's earnings report last week. Much of the results confirm that the athletic apparel, footwear, and accessories maker remains on a viable long-term growth trajectory. However, there were three very crucial takeaways from Nike's call that investors should know about.
Still innovating
The first major takeaway is that Nike management is adamant about remaining innovative. Much of the company's prepared remarks in its most recent quarterly earnings report were dedicated to explaining how Nike is innovating in different product categories.
The company is set to reveal its new Magista soccer boot on April 29 and expectations are high. With advanced technology like Nike Flyknit, 360-degree rotational traction, and a sock-like fit, the boot is being hailed as a game-changer, quite literally. Nike claims that after the boot is released, "[s]occer will never be the same."
The boot was designed with input from some of the world's best soccer players, including Barcelona's Andres Iniesta and Paris Saint-Germain's Thiago Silva. Watch the video below for more of the professional-player reaction to Magista.
Also, Nike recently launched the Silver Speed collection, which is a line of training/sportswear apparel designed to be both lightweight and breathable. It also debuted the Vapor Carbon Elite Cleat, which is a football shoe designed to enhance player speed and cut ability. Both products were shown off at the Super Bowl in the New York area.
On driving innovation in the future, Nike President and Chief Executive Officer Mark Parker explained:
Because we are Nike we just don't innovate for the present, we innovate for the future. The steps we're taking with digital, Flyknit[,] and 3D printing technologies and with new materials and methods of manufacturing are driving us to improve performance and achieve new levels of sustainability.
For Nike, which is the current undisputed leader in global athletic footwear, it is vital for management to remain ahead of aggressive competitors like Under Armour (UA +3.59%). Innovative products like Magista are great ways for the sneaker giant to do this.
Although still small compared to Nike, Under Armour has made strides in the footwear market recently. The company's Speedform Apollo running shoe, which has largely been met with positive consumer reviews, was recently awarded "Best Debut" by Runner's World magazine.
Under Armour management has already proven its ability to enter new markets via its effective expansion among female athletes in recent years. As a result, there's little reason to doubt that the apparel maker can find similar success in footwear. The Speedform Apollo represents the first major step in that regard.
World Cup momentum is increasing
The second major takeaway is that Nike remains perfectly positioned to benefit from its heavy involvement with the 2014 FIFA World Cup in Brazil, which begins in June.
Not only has Nike prepared for its new flagship soccer boot Magista to debut shortly before the World Cup, but it's on the cusp of launching more new products tailored for the global soccer market. CEO Parker explained,
Products we've launched so far take the game of football to a new level and before the first whistle in Brazil we will have more amazing products to come. Football is the biggest sport in the world and Nike is the leader in innovation for athletes.
Direct-to-consumer business is accelerating
The third major takeaway is that Nike is becoming increasingly successful in its attempt to reach consumers directly. In the quarter, Nike's online sales grew a staggering 57%, driven by increases in traffic, conversion, and average order size.
An important aspect is that Nike's online business still only accounts for approximately 15% of the company's direct-to-consumer business. This indicates that there is still substantial room for growth online for Nike going forward.
Bottom line
All major takeaways from Nike's most recent earnings release indicate that the global company is still ahead of its competitors in many ways. Most importantly, by continuing to innovate, capitalizing on world events and growing organically online, Nike management remains dedicated to keeping Nike at the top of the industry.
