Nike (NKE 3.07%) has been a top player in the sports-product market for most of the past few decades, growing from its humble roots in 1964 to become the athletic behemoth it is today, posting $28 billion in sales in fiscal 2014 and holding more than 50% market share in the United States. Nike went public in 1980, and under co-founder Phil Knight's tenure as CEO and then as chairman, the stock has soared more than 32,000% in those 35 years.
Legendary entrepreneur Phil Knight. Photo: Nike.com.
The legendary entrepreneur behind Nike's success is founder Phil Knight, who started the company when he was just 25 and oversaw its growth for decades. Even though he stepped down as CEO nearly 10 years ago, he has remained an active leader as chairman of the board of directors. Now, at 77 years old, Knight is stepping down as chairman next year and retiring from an active leadership role. Is the company's future in question without Knight's guidance?
Nike under Knight
Knight started his college career as a track and field athlete at The University of Oregon and moved on to Stanford for graduate school (MBA '62). After traveling to Japan and being impressed by the quality of athletic shoes he saw manufactured there, he returned to the states to team up with his former track coach to sell running shoes.
That company was initially called Blue Ribbon Sports, but in 1972 the name was changed to Nike, after the Greek goddess of victory. After a few years of hustling and selling shoes out of his car, a few well-timed endorsements, and finally national and then international attention, Nike grew by leaps and bounds to become the world's largest athletic-apparel company. Knight has now been at the helm of Nike for nearly 50 years, and he's ready to step down and let the company evolve without him.
"For me, Nike has always been more than just a company -- it has been my life's passion," Knight said in a June 30 statement. "Over the years, I've spent a great deal of time considering how I might someday evolve my ownership and leadership of Nike in a way that benefits all of our stakeholders. ... For myself, I intend to continue to work with Nike and look forward to contributing to its future well after my chairmanship ends."
Can Nike stay competitive without Knight?
So Knight will still play a role in the company on some level even after he steps down, but eventually he won't play a role at all, and we need to examine whether the company will still be a long-term bet even without him at the helm. Thanks to the incredible team he's put in place and the culture of constant innovation he's created, Nike indeed still looks like a strong long-term play.
For one thing, current CEO Mark Parker, who's been CEO since 2006, has done an excellent job taking Nike from the hardships it experienced during the financial crisis in 2008 to the growth the company has seen over the past five years, nearly doubling earnings from 2010 to 2015.
NKE Net Income (Annual) data by YCharts
Mark Parker. Image source: about.nike.com
Parker had a long history with Nike before he was named CEO, joining Nike in 1979, before it went public. During his more than 35 years with Nike, Parker has played key roles on innovation teams, meaning that his leadership of the company will probably continue to focus on innovating rather than just selling more and more apparel.
Under his guidance in the past decade, Nike has been able to continually evolve itself and remain a growth company. Additionally, acquiring sub-brands such as Hurley and Converse (two additions Parker was a key component in making happen), diversifying into new sports and segments, and continuing to aggressively grow internationally have all helped Nike keep growing. The past few years have been some of Nike's most successful thanks to Parker.
As Knight steps down as chairman, it's likely that Parker will take his place as chairman. Knight has recommended that to the board. Knight's son Travis -- president and CEO of animation studio LAIKA, which specializes in feature films -- was recently appointed to the board. Parker said he expects fiscal 2016 to be Nike's best year yet, with rising future orders, strong segment growth in some of its most important businesses, such as direct-to-consumer and Converse sales, and increasing margins from selling higher-priced goods.
Altogether, Nike seems to have been performing incredibly well over the past nine years under CEO Parker and has a proven track record of innovation and growth beyond just what Knight put into place during his years as CEO. Therefore, there's little reason to believe the company won't be able to continue its successful run after Knight steps down completely.
