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Why Did Nike Sue Boris Berian?

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Price movement

Nike (NKE) has a market cap of $90.2 billion. It fell by 1.4% to close at $53.55 per share on June 7, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -2.7%, -8.1%, and -13.9%, respectively, as of the same day.

This means that NKE is trading 4.7% below its 20-day moving average, 8.0% below its 50-day moving average, and 11.2% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 1.2% of its holdings in Nike. IWY tracks an index of US large-cap growth stocks selected from 200 of the largest US companies by market cap. The YTD price movement of IWY was 1.6% as of June 7, 2016.

The market caps of Nike’s competitors are as follows:

  • VF Corporation (VFC)—$26.2 billion
  • Under Armour (UA)—$6.9 billion
  • Skechers USA (SKX)—$4.9 billion

Nike and Boris Berian

Nike has sued Boris Berian for signing a contract with its competitor, New Balance Athletics, and for violating its endorsement deal. After this incident, Boris has been warned for not qualifying in Olympic trails. The company used these techniques to keep its athletes.

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Performance of Nike in fiscal 3Q16

Nike (NKE) reported fiscal 3Q16 revenues of $8 billion, an increase of 7.7% over the $7.5 billion it saw in fiscal 3Q15. Revenues from its Footwear and Apparel Brands segments rose by 11.1% and 8.4%, respectively. Revenues from the Equipment and Global Brand divisions fell by 7.6% and 41.4%, respectively, in fiscal 3Q16 over fiscal 3Q15.

The company’s net income and EPS (earnings per share) rose to $950 million and $0.55, respectively, in fiscal 3Q16. This is compared to net income and EPS of $791.0 million and $0.45, respectively, in fiscal 3Q15.

Cash and inventories

Nike’s cash and cash equivalents and inventories rose by 0.96% and 8.1%, respectively, in fiscal 3Q16, as compared to fiscal 3Q15. Its current ratio and debt-to-equity ratio rose to 3.1x and 0.71x, respectively, in fiscal 3Q16, as compared to 2.7x and 0.66x, respectively, in fiscal 3Q15.

In fiscal 3Q16, the company repurchased 24.3 million shares for ~$1.5 billion and completed its previously announced, four-year share repurchase program in September 2012.

Nike expects to deliver 12% more Nike Brand athletic footwear and apparel orders from March 2016–July 2016 than it did during the same period in 2015.

In the next part of the series, we’ll take a look at Thor Industries.

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