Under the Spotlight: Nike

A piece of rubber and a waffle were the foundations for the most recognisable brand on Earth. With a US$270b market cap, Nike is more than just a shoe company. Read all about it.

Carrying the name of the Greek goddess of victory might seem a bit pretentious, but if you’re the biggest sports brand on the planet, the name may be adequate. Since the 1960s, Nike has led the world in sports innovation while creating one of the most recognisable brands ever. 

Originally named Blue Ribbon Sports, the company emerged in upstate Oregon to act as a distributor for Onitsuka Tigers, the iconic Japanese sneaker. Business was doing well until the contract was broken in 1971. Luckily for founder Bill Bowerman, he’d been working on his own project in the background. He created his first sneakers by putting rubber in waffle iron to create a gripper sole.

The models would soon fall into the favour of athletes and sports practitioners around the world.


Equipped with revolutionary technology, the company changed its name to Nike and started to adopt the iconic “swoosh” as its logo Fifty years later, Nike is a company with more than 76,000 employees and more than a thousand stores worldwide, with revenues exceeding $46 billion annually.

The leap

Another major breakthrough in Nike’s history was the launch of the Air Jordan in 1985. At the time the company was having a cold run, having to deal with higher-revenue competitors like Adidas and Converse, worn by most NBA players at the time. Everything would change when they signed MJ.

In addition to a $500,000 contract, Jordan would have custom-designed sneakers (the Air Jordan) and would receive stock option bonuses proportional to the number of sneakers sold. The clause drove Jordan to sell his sneakers. 36 years later, the Air Jordan line is the company’s main source of revenue, selling more than the entire soccer and training lineup combined, earning more than $4.7 billion in 2021 alone.

Wins & losses

After conquering the NBA with Air Jordan, stealing the spotlight that once belonged to rival Converse, Nike ended up acquiring the competitor in 2003. To this day the brand remains in its product portfolio, but not all of the investments made by Nike were that successful.

In 2002 Nike acquired the surfwear manufacturer Hurley and in 2007 made the acquisition of the sports brand Umbro, with great penetration in the football market around the world. Unfortunately, the synergy of the brands was little, which led the company to carry out divestments, disposing of Umbro in 2012 and Hurley in 2020.

Playing as a team

Despite having more than 76,000 employees and being one of the leading footwear brands on the planet, Nike does not own or manage any factories at all. All 515 of the company’s supplying factories are outsourced, which allows the company to focus on the design and development of new products, without worrying about industrial management.

While Nike hasn’t had the best track record in terms of factory work conditions, it is something the company is trying to change. Not only has the company been setting goals to improve working conditions for hiring suppliers. With the enrichment of the Asian giant in recent decades, industries were forced to move to Southeast Asia. Today, 51% of Nike’s supplying factories are in Vietnam and another 24% are in Indonesia.

For this reason, the company has been suffering from the effects of the lockdowns carried out in Vietnam to contain the advance of the Covid-19 pandemic. Like any retailer, Nike was heavily impacted by the effects of the crisis caused by the pandemic, but the low financial leverage allowed the company to go through the troubled scenario relatively unharmed: if today the company’s total debt is US$12.8 billion, the company’s balance sheet cash covers the figure comfortably, totalling $13.7 billion.

Gold medal

With the exception of luxury markets, fashion retail is not known for having very high-profit margins. This is not the case with Nike. With a 46 percent gross profit margin, the sporting goods maker would be the envy of Bernard Arnault and the Louis Vuitton crowd. And don’t be fooled into thinking that this is common: the industry average is 35%.

Revenues have also been growing, totalling $12.2 billion in the last quarter, up 16% from 2020, which was an atypical year. The company took advantage of the social isolation moment to expand its direct e-commerce sales, which rose 29% to $4.7 billion. The biggest growth came in the sports apparel and equipment sector, which grew 20% and 25% respectively. However, the main volume remains footwear, responsible for roughly 66% of revenue.

Among the challenges faced by the company is the increase in administrative expenses, which grew 20% in the last quarter, mainly caused by the increase in salaries, totalling US$3.6 billion. Furthermore, Nike still suffers from a high geographic concentration: of its 1,048 stores, 325 are located in the US. The company struggles to grow in the Chinese market, being the company’s slowest growing market, even though it has more than one billion potential consumers.

Over the past three years, the company’s revenue has been growing at an average of 7.41% per year. With this pace of growth, in less than ten years the company’s revenues would double, but this can be a difficult feat to be accomplished for a company that makes tens of billions of dollars annually. The challenge might be difficult, but investors certainly expect Nike to live up to its motto: Just Do It.

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