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.
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%.
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:UAA), 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.
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.