Nike’s $50 Billion Revenue Target: Wall Street Weighs In

Nike LeBron 13
Nike LeBron 13 Written in the Stars sneakers.
Courtesy of Nike.

Much of Wall Street’s footwear-and-apparel analysts responded to Nike Inc. CEO Mark Parker’s ambitious growth goals, laid out at the firm’s Investor Day Wednesday, with resounding praise.

“We came away from Nike’s [investor day] impressed by the product pipeline and the robust revenue targets,” wrote Camilo Lyon, an analyst at Canaccord Genuity Inc.

In addition to its headline-making objective of $50 billion in revenues by 2020, the firm’s bullish five-year targets include: doubling its women business to $11 billion in sales; expanding Brand Jordan beyond basketball and hitting $4.5 billion in revenues; as well as e-commerce and direct-to-consumer growth to $7 billion and $16 billion respectively.

“Nike’s strength lies in its superb treatment of its brand and brand messaging, as well as its grassroots efforts to reach existing and potential customers,” Sterne Agee CRT analyst Sam Poser wrote on Oct. 15. “With an overwhelming [No. 1] global position and a large amount of spending dollars at its disposal, Nike is able to invest in and achieve excellent top and bottom-line growth. Sales and margin opportunities remain across all geographies, categories and genders.”

International expansion — with China expected to reach $6.5 billion in revenues by 2020, compared with $3.1 billion in 2015 — will be a major component of the firm’s accelerated growth, analysts noted.

“China [has a] favorable backdrop, from a growing middle class to increased sports participation,” Susquehanna LLLP financial analyst Christopher Svezia wrote. “[Direct-to-consumer] will continue being the key channel driver. Within Emerging Markets, while growth will come from current and new categories, the prevailing tailwind is the fact that the category offense is still in the very early stages in countries where sports are an obsession, [such as] Brazil and Mexico.”

Nike’s plans to expand Jordan Brand also drew attention from market watchers.

Poser is upbeat on the growth targets for the label, citing the Jordan shop-in-shops at Dick’s Sporting Goods and Nike’s new deal with the University of Michigan — which includes Jordan Brand — as proof.

“Jordan continues to cross over to the performance and lifestyle/casual spectrums. The Jordan Eclipse, a casual shoe, for example, is driving material incremental sales,” Poser wrote.

Management expects direct-to-consumer, bolstered by e-commerce, to be the biggest growth driver over the next five years. And Parker announced that Nike is adding a new product-innovation center at its Beaverton, Ore., campus.

“This is a 125,000-sq.-ft. facility that will house some of our most advanced manufacturing and design technologies,” Parker said of the center, which is slated to open this month. The new technologies will include advanced knitting machines, 3D-printing and automation, the CEO noted.

Management also unveiled a new partnership with manufacturer Flex, a $26 billion company with a presence in 30 countries. Flex works with an array of industries, including electronics, medical devices and automotive.

“Over the coming years, Nike has the opportunity to dramatically shift its manufacturing processes to the benefit of its profitability via gross margin,” wrote Lyon. “Partnerships with key manufacturers, such as Flex, should help increase the pace of Nike’s global supply chain while also reducing material waste.”