Nike Eyes Acquisitions, Says Sales to Grow 41% by 2015
Nike Inc. Chief Executive Officer Mark Parker said the world’s largest maker of athletic shoes will pursue acquisitions and partnerships as it goes after the growing middle class in developing markets such as China.
Annual revenue will climb 41 percent by 2015, also helped by store openings and the expansion of existing product lines, executives said. The company will look to build brands like Converse and Umbro.
“Nike has unlimited opportunities and limited resources,” Parker, 54, said at a meeting with analysts and investors in New York today. “Our job is to be surgical and aggressive with these resources.”
China is the company’s biggest growth opportunity, said Willem Haitink, vice president of the Nike brand in greater China. Beaverton, Oregon-based Nike plans to lure shoppers with offers such as lightweight basketball shoes with no stitching and double its business in the country within five years.
China accounted for 9.7 percent of Nike’s revenue in the third quarter ended Feb. 28, and helped the company post its first sales growth in five quarters. The country’s economy grew 8.7 percent last year, compared with a 2.4 percent contraction in the U.S.
Annual revenue will grow to $27 billion in 2015 from $19.2 billion in the fiscal year ended May 2009, according to Parker. The company targets sales growth of a high single-digit percentage and earnings-per-share increases in the “mid-teens” on a percentage basis, the CEO said.
In China, central and eastern Europe and emerging markets, sales will grow in the low double-digits on a percentage basis, or as much as $3.5 billion by 2015, Chief Financial Officer Donald Blair said. Revenue in North America, western Europe and Japan will grow in the mid-single-digits, or as much as $3.5 billion, he said.
Nike dropped $2.14, or 2.8 percent, to $75.21 at 4 p.m. in New York Stock Exchange composite trading. U.S. stocks fell today on concern that European government debt levels will derail the global economic recovery, with the Standard & Poor’s 500 Index sliding 0.7 percent.
The shoe maker plans to invest $500 million to $600 million a year over the next five years to build its retail network.
The company plans to increase the number of its Nike-brand stores by 61 percent to 738, and double store revenue to $4.8 billion by 2015, said Jeanne Jackson, president of the direct- to-consumer division for Nike. The Nike brand accounts for about 85 percent of total revenue, the company said in a statement.
Nike expects $12 billion in cumulative free cash flow from operations by 2015 and plans to buy back $5 billion in shares, the CEO said.
The company also plans to increase the dividend consistently over the next five years. It may disburse about $2 billion a year to shareholders, the CFO said.