Breaking Down NIKE, Inc. (NKE) Financial Health: Key Insights for Investors

Are you an investor keeping a close watch on NIKE, Inc. (NKE)? With a market cap of $100.49 billion as of March 2025, the athletic apparel giant remains a key player in the consumer cyclical sector. But how healthy is NIKE's financial standing right now? Despite a recent revenue decline of -9.30%, the company shows commitment to returning profits to shareholders, reflected in its dividend yield of 2.36% and a payout ratio of 51.16%. Is NIKE poised for a comeback, or are there challenges on the horizon? Dive in to explore the key financial insights that can help you make informed decisions.

NIKE, Inc. (NKE) Revenue Analysis

Analyzing NIKE, Inc.'s (NKE) financial health requires a detailed look at its revenue streams. Revenue streams are the various ways a company generates income, and understanding these is crucial for investors. Let's break down NIKE's primary revenue sources, growth rates, and segment contributions.

Breakdown of Primary Revenue Sources:

NIKE's revenue primarily comes from:

• Footwear: This remains NIKE's largest revenue driver, encompassing various categories like running, basketball, and lifestyle shoes.
• Apparel: Includes sportswear, athletic wear, and accessories.
• Equipment: Sporting equipment and accessories.
• Global Regions: Revenue is generated across North America, Europe, Greater China, and Asia Pacific & Latin America (APLA).

Year-over-Year Revenue Growth Rate:

To evaluate NIKE's performance, it's important to examine its year-over-year revenue growth. Here's a look at recent trends:

In fiscal year 2024, NIKE reported revenue of $51.4 billion, a 1% increase compared to fiscal year 2023, and a 6% increase on a currency-neutral basis. NIKE Direct sales for fiscal year 2024 reached $21.3 billion, up 8%, and up 12% on a currency-neutral basis. NIKE Brand Digital sales increased by 6%, or 9% on a currency-neutral basis. Wholesale revenues were down 2%, but flat on a currency-neutral basis, indicating some challenges in that segment.

Contribution of Different Business Segments to Overall Revenue:

Understanding how each segment contributes to NIKE's overall revenue provides insights into the company's strengths and areas for improvement. Here’s a general overview:

For fiscal year 2024:

• Footwear: Remains the dominant segment, contributing the largest portion of revenue.
• Apparel: A significant contributor, driven by sportswear and athletic wear.
• Equipment: A smaller, but still important, part of the revenue mix.
• North America: Revenue of $20.45 billion, down 2% compared to the previous year.
• Europe, Middle East & Africa (EMEA): Revenue of $13.76 billion, up 3% compared to the previous year.
• Greater China: Revenue of $7.98 billion, up 8% compared to the previous year.
• Asia Pacific & Latin America (APLA): Revenue of $8.21 billion, up 6% compared to the previous year.

Analysis of Any Significant Changes in Revenue Streams:

Several factors can influence changes in NIKE's revenue streams. These include:

• Shift to NIKE Direct: NIKE's focus on its direct-to-consumer strategy has led to increased sales through NIKE Direct channels, impacting wholesale revenue.
• Digital Sales Growth: The growth in NIKE Brand Digital sales reflects the increasing importance of online channels.
• Regional Performance: Varying growth rates in different regions highlight the impact of local market conditions and strategic initiatives. Greater China and APLA showed substantial growth, while North America experienced a slight decline.

For further insights into NIKE's mission, vision, and core values, you can explore: Mission Statement, Vision, & Core Values of NIKE, Inc. (NKE).

NIKE, Inc. (NKE) Profitability Metrics

Understanding NIKE, Inc.'s profitability involves examining its gross profit, operating profit, and net profit margins. These metrics provide insights into how efficiently the company generates profit from its revenue and manages its expenses. Analyzing these figures over time and comparing them against industry benchmarks helps investors gauge NIKE's financial health and competitive positioning. Also make sure to check Mission Statement, Vision, & Core Values of NIKE, Inc. (NKE).

Let's delve into NIKE, Inc.'s profitability metrics:

• Gross Profit: Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
• Operating Profit: Operating profit is a profit from business operations (gross profit less operating expenses) before deduction of interest and taxes.
• Net Profit: Net profit is the amount of money a business makes after deducting all operating, interest, and tax expenses from its revenue.

NIKE's financial performance can be further illuminated by examining specific data points from its 2024 fiscal year.

NIKE's operational efficiency can be evaluated through several key factors:

• Cost Management: Effective cost management involves controlling expenses related to production, operations, and administration.
• Gross Margin Trends: Monitoring gross margin trends helps assess the company's ability to maintain profitability amidst changing market conditions.

NIKE, Inc.'s financial statements provide detailed information on these metrics, allowing for a comprehensive analysis of the company's profitability and operational efficiency.

NIKE, Inc. reported a gross profit of $22.7 billion for the fiscal year 2024. This indicates the revenue remaining after deducting the cost of goods sold. The gross margin, calculated as gross profit divided by revenue, stood at 44.8%. This shows the percentage of revenue that exceeds the cost of goods sold.

The operating income for NIKE in fiscal year 2024 was $6.4 billion, demonstrating the company's profitability from its core business operations after accounting for operating expenses.

NIKE's net income for fiscal year 2024 amounted to $5.1 billion. The net profit margin, which is net income divided by revenue, was 10.1%. This illustrates the percentage of revenue remaining after all expenses, including taxes and interest, are deducted.

To provide a clearer picture, here's a table summarizing these key profitability metrics for NIKE, Inc. in fiscal year 2024:

NIKE, Inc. (NKE) Debt vs. Equity Structure

Understanding how NIKE, Inc. (NKE) finances its operations and growth is crucial for investors. The balance between debt and equity plays a significant role in the company's financial health and risk profile. Here's an overview of NIKE's debt levels, its debt-to-equity ratio, and how it manages its financing strategies.

As of fiscal year 2024, NIKE maintains a mix of both short-term and long-term debt. Monitoring these levels helps in assessing the company’s immediate and future financial obligations. Here's a breakdown:

• Short-term Debt: This includes obligations due within one year, such as commercial paper and current portions of long-term debt.
• Long-term Debt: These are obligations due beyond one year, often including bonds and term loans.

The debt-to-equity ratio is a key metric in evaluating NIKE's financial leverage. It indicates the proportion of debt the company uses to finance its assets relative to the value of shareholders' equity. A lower ratio generally suggests less risk, while a higher ratio indicates greater financial leverage and potential risk.

For NIKE, maintaining an optimal debt-to-equity ratio is vital. Here's what to consider:

• Industry Standards: Comparing NIKE's debt-to-equity ratio to that of its competitors provides insights into whether NIKE is more or less leveraged than its peers.
• Historical Trends: Analyzing how NIKE's debt-to-equity ratio has changed over time can reveal trends in its financing strategies.

Recent activities such as debt issuances, credit ratings, and refinancing can significantly impact NIKE's financial structure. For example:

• Debt Issuances: New bond offerings can provide NIKE with additional capital for investments or acquisitions.
• Credit Ratings: Ratings from agencies like Standard & Poor's and Moody's affect the interest rates NIKE pays on its debt.
• Refinancing: Replacing existing debt with new debt at lower interest rates can reduce NIKE's borrowing costs.

Balancing debt financing and equity funding is critical for NIKE. Debt can provide a cost-effective way to finance growth, but excessive debt can increase financial risk. Equity funding, on the other hand, doesn't require repayment but can dilute existing shareholders' ownership.

Here’s a look at how NIKE strategically manages this balance:

• Strategic Investments: NIKE may use debt to fund strategic initiatives that are expected to generate significant returns.
• Share Repurchases: NIKE might use its cash flow to buy back shares, increasing earnings per share and returning value to shareholders.

In fiscal year 2024, NIKE's approach to balancing debt and equity reflects its commitment to sustainable growth and shareholder value. By carefully managing its debt levels and equity, NIKE aims to maintain a strong financial position while pursuing its strategic objectives.

For more insights into NIKE's investors, check out this related article: Exploring NIKE, Inc. (NKE) Investor Profile: Who’s Buying and Why?

NIKE, Inc. (NKE) Liquidity and Solvency

Liquidity, the ability to meet short-term obligations, is crucial for NIKE, Inc. (NKE). Analyzing key ratios and cash flow trends provides insights into the company's financial health. For further details, check out: Breaking Down NIKE, Inc. (NKE) Financial Health: Key Insights for Investors.

Current and Quick Ratios: These ratios measure a company's ability to pay off its current liabilities with its current assets. The current ratio includes all current assets, while the quick ratio excludes inventory, which is less liquid. A higher ratio generally indicates better liquidity.

As of the fiscal year 2024:

• NIKE's current ratio stood at 2.2x.
• The quick ratio was 1.4x.

These figures suggest a solid liquidity position, indicating that NIKE can comfortably cover its short-term liabilities with its current assets.

Working Capital Trends: Monitoring working capital—the difference between current assets and current liabilities—reveals how efficiently NIKE manages its short-term resources. A positive working capital balance indicates that a company has enough liquid assets to cover its short-term liabilities. Declining working capital could signal potential liquidity issues.

In 2024, NIKE's working capital was approximately $8.6 billion. This substantial figure reflects effective management of short-term assets and liabilities, contributing to the company's financial stability.

Cash Flow Statements Overview: Examining cash flow trends from operating, investing, and financing activities provides a comprehensive view of NIKE's liquidity. Positive cash flow from operations indicates that the company is generating enough cash from its core business to cover its expenses and investments. Trends in investing and financing activities can reveal how NIKE is managing its long-term assets and capital structure.

NIKE's cash flow activities for the fiscal year 2024 can be summarized as follows:

• Operating Activities: Generated a cash flow of $5.9 billion, reflecting strong business performance.
• Investing Activities: Resulted in a net cash outflow of $1.4 billion, primarily due to investments in infrastructure and technology.
• Financing Activities: Showed a net cash outflow of $4.6 billion, mainly from share repurchases and dividend payments.

Potential Liquidity Concerns or Strengths: Analyzing these metrics helps identify potential liquidity concerns or strengths. Consistent positive cash flow from operations and healthy current and quick ratios suggest strong liquidity. However, significant outflows from financing activities, such as large share buybacks, could potentially strain liquidity if not managed carefully.

NIKE's liquidity position is robust, supported by strong cash generation and efficient management of working capital. The following table summarizes key liquidity metrics for NIKE, Inc. (NKE) in 2024:

Overall, NIKE, Inc. (NKE) demonstrates a solid liquidity position, supported by healthy financial metrics and effective cash flow management.

NIKE, Inc. (NKE) Valuation Analysis

Determining whether NIKE, Inc. (NKE) is overvalued or undervalued requires examining several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, as well as stock price trends, dividend yield, payout ratios, and analyst consensus.

Here's a breakdown of these elements:

• Price-to-Earnings (P/E) Ratio: This ratio compares NIKE's stock price to its earnings per share (EPS). A higher P/E ratio might suggest that the stock is overvalued, while a lower P/E could indicate undervaluation relative to its peers or historical averages.
• Price-to-Book (P/B) Ratio: The P/B ratio measures NIKE's market capitalization against its book value of equity. It can help investors determine if the stock price is justified by the company's net asset value.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This ratio compares NIKE's enterprise value (market cap plus total debt minus cash) to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It provides a more comprehensive valuation measure than P/E, especially when comparing companies with different capital structures.

Analyzing these ratios in isolation is not enough. It’s crucial to compare them against industry averages and NIKE's historical performance to provide context.

Stock Price Trends: Reviewing NIKE's stock price trends over the last 12 months (or longer) can reveal important insights into market sentiment and investor confidence. Significant price appreciation might suggest overvaluation, while a declining price could point to undervaluation, assuming the company's fundamentals remain strong.

Dividend Yield and Payout Ratios: For income-focused investors, NIKE's dividend yield (annual dividend per share divided by stock price) and payout ratio (percentage of earnings paid out as dividends) are important. A higher dividend yield can make the stock attractive, but a high payout ratio might raise concerns about the sustainability of future dividend payments.

Analyst Consensus: Tracking analyst ratings (buy, hold, or sell) and price targets can provide a snapshot of professional opinions on NIKE's valuation. A consensus 'buy' rating with a significant upside to the current price could suggest undervaluation, while a 'sell' rating might indicate overvaluation.

A comprehensive valuation analysis should also consider qualitative factors such as NIKE's brand strength, competitive positioning, and growth prospects. Additionally, macroeconomic conditions and industry trends can influence the company's valuation.

For more insights into NIKE, Inc.'s mission, vision, and core values, check out: Mission Statement, Vision, & Core Values of NIKE, Inc. (NKE).

NIKE, Inc. (NKE) Risk Factors

NIKE, Inc. (NKE) faces a variety of internal and external risks that could significantly impact its financial health. These risks range from intense industry competition and evolving consumer preferences to regulatory changes and global market conditions.

Industry Competition: The athletic footwear and apparel market is highly competitive. NIKE, Inc. (NKE) competes with a large number of global and domestic competitors, some of which may have greater financial, marketing, or distribution resources. Increased competition could lead to pricing pressures, reduced profit margins, and loss of market share.

Regulatory Changes: Changes in trade policies, import duties, and other regulations can significantly affect NIKE, Inc. (NKE)'s supply chain and distribution network. For example, new tariffs or trade restrictions could increase the cost of goods sold and reduce profitability. Compliance with environmental regulations and labor laws also adds to operational costs.

Market Conditions: Economic downturns, currency fluctuations, and geopolitical instability can all impact NIKE, Inc. (NKE)'s financial performance. A decrease in consumer spending during a recession could lead to lower sales volumes. Fluctuations in exchange rates can affect the value of international sales and increase the cost of imported materials.

Recent earnings reports and filings have highlighted several operational, financial, and strategic risks:

• Supply Chain Disruptions: The global supply chain remains vulnerable to disruptions caused by geopolitical events, natural disasters, and pandemics. These disruptions can lead to delays in production, increased shipping costs, and reduced availability of products.
• Inventory Management: Effective inventory management is crucial for minimizing costs and maximizing sales. Excess inventory can lead to markdowns and reduced profit margins, while insufficient inventory can result in lost sales opportunities.
• Brand Image and Reputation: NIKE, Inc. (NKE)'s brand image is a valuable asset, and any damage to its reputation could have significant financial consequences. Negative publicity related to labor practices, product quality, or ethical concerns could lead to boycotts and reduced sales.

Mitigation strategies and plans to address these risks include:

• Diversifying the Supply Chain: NIKE, Inc. (NKE) is working to diversify its supply chain by sourcing materials and manufacturing products from multiple countries. This reduces the company's reliance on any single region and mitigates the impact of localized disruptions.
• Investing in Technology: NIKE, Inc. (NKE) is investing in technology to improve inventory management, optimize logistics, and enhance the customer experience. This includes using data analytics to forecast demand, track inventory levels, and personalize marketing messages.
• Enhancing Risk Management: NIKE, Inc. (NKE) has implemented a comprehensive risk management framework to identify, assess, and mitigate potential risks. This framework includes regular risk assessments, contingency planning, and crisis management protocols.

The following table summarizes some of the key financial data for NIKE, Inc. (NKE) based on the 2024 fiscal year:

For additional insights into NIKE, Inc. (NKE)'s mission, vision, and core values, you can refer to Mission Statement, Vision, & Core Values of NIKE, Inc. (NKE).

NIKE, Inc. (NKE) Growth Opportunities

For investors eyeing future potential, a look into NIKE, Inc.'s (NKE) growth prospects reveals several key factors. These include product innovation, strategic market expansions, impactful acquisitions, and the building of strong competitive advantages.

Key Growth Drivers:

• Product Innovation: NIKE consistently invests in research and development to create innovative products. This includes advancements in footwear technology, apparel design, and wearable tech, which drive consumer demand and brand loyalty.
• Market Expansion: NIKE strategically expands its presence in high-growth markets, particularly in Asia and emerging economies. This involves opening new retail locations, strengthening e-commerce platforms, and tailoring products to local preferences.
• Strategic Initiatives and Partnerships: NIKE leverages strategic initiatives and partnerships to drive growth.

To get an idea of future revenue growth, consider these points:

Revenue Growth Projections and Earnings Estimates:

While specific revenue growth projections and earnings estimates can fluctuate based on market conditions and internal forecasts, several factors influence these figures:

• Digital Sales Growth: NIKE's increasing focus on digital sales channels, including its e-commerce platform and mobile apps, is expected to drive significant revenue growth.
• International Market Expansion: Expansion into emerging markets, particularly in Asia, presents substantial growth opportunities.
• Product Innovation: The successful launch of new and innovative products can significantly boost revenue.

Strategic Initiatives and Partnerships:

NIKE’s strategic initiatives and partnerships play a crucial role in driving future growth:

• Sustainability Initiatives: NIKE's commitment to sustainability, including using recycled materials and reducing its carbon footprint, resonates with environmentally conscious consumers and enhances its brand image.
• Brand Collaborations: Collaborations with influential athletes, celebrities, and fashion designers create buzz and attract new customers.
• Digital Transformation: Investments in digital technologies, such as data analytics and AI, improve supply chain efficiency, personalize customer experiences, and drive sales growth.

Competitive Advantages:

NIKE's strong competitive advantages position the company for sustained growth:

• Brand Strength: NIKE is one of the most recognized and valuable brands in the world, commanding a premium in the athletic apparel and footwear market.
• Innovation: NIKE’s commitment to innovation ensures a continuous flow of new and exciting products.
• Scale and Distribution: NIKE’s extensive global supply chain and distribution network enable it to efficiently reach customers worldwide.

These elements, when combined, paint a picture of a company poised for continued expansion and financial success. For more insights into NIKE's investor profile, check out: Exploring NIKE, Inc. (NKE) Investor Profile: Who’s Buying and Why?