It's finally been cracked. The key to running a successful business is so simple that it's shocking we didn't discover it earlier. It turns out all you need to do is sell a product that supports the most popular sport in the entire world. Nike (NKE 15.28%) made the breakthrough earlier this year when, in gearing up for the World Cup, the 250 million soccer players and billions of soccer fans worldwide bought all kinds of stuff. The World Cup turned normal humans into soccer-loving savages and they quickly gave Nike $7.4 billion over the quarter.
In fairness, not all of that was soccer's doing. Nike had a solid quarter across many of its businesses, but soccer was a standout. Revenue from the division, which was close to $2 billion in the quarter last year, grew 18% to $2.3 billion. The World Cup made Nike a fortune, but only because Nike had the good sense to take advantage.
Nike's goal differential
Nike is making the most of the World Cup with more players wearing Nike shoes than all other brands combined, according to the company. The momentum of the tournament is going to help Nike as it pushes into the next fiscal year, and it's expecting revenue to grow by low double digits.
Look back at that first point -- more shoes than all other brands combined. The "other brands" in that statement are basically just Adidas and Puma -- founded by feuding brothers Adolf and Rudolf Dassler in postwar Germany. Under Armour (UAA 0.88%), which is often synonymous with football in the U.S., isn't even on the shoe radar.
According to a report from Businessweek earlier this month, Under Armour has shod two -- as in one plus another -- players in the World Cup, one of whom has been eliminated. The company is trying to make inroads, and it needs to if it wants to compete on the world stage, but it's slow going. Right now, Nike is simply dominating the game, with Under Armour watching from the bench.
Not all soccer at Nike
Nike also had success in its basketball division, which grew revenue by 19% over the quarter last year. Actually, the only decline came in Nike's second smallest division, golf. Everything else grew at a solid clip, helped along by higher average sale prices. That pushed gross margin up 1.7 percentage points for the quarter and up 1.2 points for the fiscal year.
The company's solid sales growth and gross margin improvement, not to mention its consistent dividend, make it an excellent business on just about all accounts. With growth still in the double digits and a world of opportunity in areas like golf, women's wear, and emerging markets, Nike looks like it's going to continue being The Name in sports for a long time. It's easy to imagine World Cup 2016 being a repeat of 2014, for Nike and its investors.
