Where is Nike heading?

We all know about Nike.

From Roger Federer to Michael Jordan to Tiger Woods to Rafael Nadal to LeBron James endorses Nike.

But what business Nike is in?

Nike sells shoes, apparel, and other sports-related accessories - so what is the core business. Nike defines it very well.

So basically, selling shoes is a primary business, and many athletes endorse shoes. That's how they influence the purchase. And failure to do so affects Nike's business. And the company recognizes the fact.

Before we further discuss the strategy, we need to understand a few more points about the business.

• Despite COVID, Nike grew last year by 19%
• The footwear category still contributes 67% of the business

• D2C (direct to consumer) sales are growing, and that's exactly where Nike is focused.
• D2C now contribute ~40% of the sales. This share was merely 20% five years ago (in 2015/1016). Massive improvement

• The men's segment is still 52% of the total business. And Jordan Brand is the fastest growing.

So, what's changing?

For that, we need to understand the Margins trajectory.

Few points stand out.

• D2C as a % of Total Revenue has practically doubled over a decade.
• Despite the massive share of D2C now, barring last year, there is no margin improvement.
• And even during the COVID time, where a lot of the operating costs related to store ops would have been minimal, the margins were not high.

My take

• There's no doubt Nike is a phenomenon company and runs with $40 Bn in sales.
• The management foresees the future and started moving to D2C, and the company benefitted during COVID as the infrastructure was ready.
• However, the company needs to evolve in the new markets continuously, geography (apart from the USA and China), cater to unique sports, and focus on female and kids segments. Without these, the growth will depend heavily on few categories (especially Men and Basketball demand coming from the USA and China).
• I do not see a similar amount of effort from the competition (Adidas, Puma etc.). That's good for Nike.

This segment will be attractive as many tech companies may want to have some sort of integrated product like Apple is doing with Nike in the watch segment.

Do tell us what do you think about the segment and the company via comments.