Nike Inc.: Cost of Capital
BUS 5200 Dr. Zong
Bryan Cooley, Esther Ferris, Jaime Lomeli and Aamir Syed
Nike Inc., founded in 1962, has evolved from an importer of Japanese shoes as a U.S. footwear distributor to a global marketer of athletic footwear, apparel and equipment that is unrivaled in the world.
Nike has a powerful brand Portfolio with many solely owned subsidiaries that include Cole Haan, Converse Inc, Hurley International LLC, Nike Golf, and Umbro Ltd.
Nike’s world headquarters is a 76 acre campus located near Beaverton, Oregon, a suburb west of Portland. Today Nike operates in more than 160 countries around the world and employs more than ...view middle of the document...
1978 – BRS officially changes its name to Nike, Inc., May 30. Nike’s first children’s shoes are also introduced.
1979 – First line of clothing is launched and the Nike Air shoe cushioning device debuts.
1980 – Nike goes public.
1981 – Nike International, Ltd is created for overseas business.
1986 – Revenues top the landmark billion dollar mark.
1988 – The “Just Do It” campaign debuts. Now in the Americana exhibit at the Smithsonian National Museum representing the affect Nike had on America’s history.
1988 – Nike acquires Cole Haan; maker of men’s and women’s casual and dress shoes.
1990 – Nike world campus opens.
1996 – Nike equipment division is created.
1999 – Bill Bowermen passes away in his sleep at age 88.
1999 – Nike begins selling its products directly to the consumer via its web site.
2002 – Nike acquires Hurley International LLC, surf, skate and snowboard apparel brand.
2003 – International sales exceed U.S. sales.
2003 – Nike acquires Converse Inc.
2006 – Apple and Nike team up to launch Nike+.
2008 – Nike acquires Umbro Ltd., a leading United Kingdom based global soccer brand.
Fiscal Year 2001
Nike, Inc. is divided into four revenue regions, USA region, Europe, Middle East, and Africa (EMEA) region, Asia Pacific region and Americas region. Nike continued to have continued growth during fiscal year 2001. Although consolidated Income statements showed a drop in net income during fiscal year 1998, net income was steadily growing from that point on. Net income increased 1.8% in 2001over fiscal year 2000. Nike brand revenue in the United States region increased 1.8% while revenues in international regions increased 9.8%. There was a negative impact of weak international currencies that made it tough on Nike’s business and results for fiscal 2001. If the U.S. dollar had remained the same as in fiscal year 2000, the international revenues would have increased 18.6%, thus consolidated revenues would have been 9.3% instead of 1.8%. Of the $1.8% the U.S. region, its largest segment reflected a 9.2% increase in apparel sales and a 54.4% increase in equipment sales, this was offset by a 4.2% decrease in footwear sales.
Nike brand revenues from international regions continued to grow. These revenues represented 44.6% of total company revenues, $4.2 billion. In addition, revenues from the EMEA region increased by 7.4%. The Asia Pacific region increased 16.2% and the Americas region increased 9.1%. Revenues from other brands increased as well, 7.2%.
In addition to the weakness of the euro there were several other factors that caused the decrease in footwear sales. Continued liquidation of excess inventories caused by supply chain problems also had an affect. There was also the affect of the U.S. market hitting the down side of a fast growth cycle. These factors led to the negative press by Douglass Robson in the July 2, 2001 issue of Business Week.
This combination of events led Kimi Ford,...