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Nike Sprints Ahead in Footwear Products on Star Power

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Nike’s performance in footwear products in 3Q15

Nike (NKE) is the global leader in athletic footwear, with 33.6% market share. Footwear is also Nike’s (NKE) largest product category. The category accounts for ~59% of sales in the first three quarters of fiscal 2015, or $13.5 billion. Basketball and running shoes are the top-selling footwear categories. Nike’s market share in the US athletic footwear market is estimated at ~60%.

Footwear product sales for Nike and its peers are sprinting ahead. In 3Q15, Nike’s footwear sales rose 8% year-over-year (or YoY) to $4.6 billion. On a constant currency basis, footwear sales were up by 14%. In contrast, net sales rose 26.4% YoY for Skechers (SKX) to almost $570 million in 4Q14, a new record for the company.

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Basketball was a major driver for Nike in the US as well as overseas. Nike has ~97% market share in basketball footwear in the US. The company’s ability to innovate and bring new products to the market has been the prime reason why it’s able to charge premium prices. Sales were strong for Nike’s signature basketball brands, performance running footwear, and boots.

Nike also benefited from its wholesale partnership with Foot Locker (FL) in the House of Hoops retail concept. FL reported outstanding results in its last fiscal year ending February 1, 2015.

Kyrie 1

Nike introduced the Kyrie range of signature shoes in 3Q15, named after Kyrie Irving of the Cleveland Cavaliers, the Most Valuable Player in the 2014 All-Star Game in New Orleans. The footwear line debuted in December 2014. The signature shoes offer several customization options on NIKEiD, Nike’s digital site, including 19 colors and 21 accents. The star will wear variants of the customized shoes throughout the season, as part of the NIKEiD on-court customization initiative. Nike’s other signature basketball stars Kobe Bryant, LeBron James, and Kevin Durant will also feature NIKEiD on-court customization.

Meanwhile, in January 2015, rival Under Armour (UA) debuted its first signature shoes line with Stephen Curry, who plays for the Golden State Warriors.

Running not a runaway success

However, Nike has voiced concerns about core footwear in running in its North America segment. While performance footwear like the Air Pegasus 31 and the Max 2015, and lifestyle footwear categories like Roshe and Huarache, are doing quite well, Nike believes it needs to innovate more in its core running footwear category. We’ll discuss new models and Nike’s innovation pipeline in Part 4.

Nike is part of several ETFs. It constitutes ~0.4% of the portfolio holdings in the Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV). NKE is also a Dow component, and it constitutes 3.5% of the portfolio holdings of the SPDR Dow Jones Industrial Average ETF (DIA).

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