Finance

    I have been giving a thorough thought to the very thought of presenting an account of Nikes performance during the last couple of years. And I find this year better than any, primarily because it will enable me to exhibit the real strengths which the company possesses and employed to bear economic shocks of recession and come out of it shinning. It is quite tempting for me to present you, all that we have achieved in the last five years, but instead I will follow a scheme which will clearly highlight the companys excellence in meeting its long term objectives and the strengths which we have capitalized upon to grab opportunities and neutralize threats in the external environment. So lets unleash the factors which led to make Nike a star which it is today

    During the last five years, Nike has surely evolved as a global player which has let it secure its position as the leader in European foot-wear market. It surely is a growth company which is all set to achieve its target of 23 billion sales by Fiscal Year (FY) 2011. And the last five years performance makes it evident that we are consistently patrolling towards achieving our target by employing our strong financial model and the skills and abilities of our team to constantly innovate products to open new horizons of success in the market place. In this regard our brand portfolio has shown a promising performance. We focus on growing six key categories namely running, basketball, football, mens training, womens training and sportswear. Not only this, but we have had expansion in regions outside US worth mentioning growth was observed in China, Russia, Brazil, India and Jordon. It is important here to mention that we have been able to achieve growth in our portfolio by remaining committed to the sports culture in various regions to provide impeccable customer service. We have invested in subsidiaries and acquisitions which we believe will be able to strengthen profit centers for Nike, particularly Converse, Cole Haan, Nike Baur Hockey and Hurley have been showing increased growth in revenues in the last couple of years. Not only this, but we have also successfully implemented changes that have improved our operational efficiency and supply chain management. We have better forecasting and inventory management skills now which enable us to adopt lean manufacturing so that we manufacture in the most profitable manner. Most importantly, the product development has had immense investment which now enables us to utilize digital sampling and 3D models so that development costs can be reduced. I am focusing specifically on cost control primarily because recession in the last couple of years could have hurt us bad, if we would not have controlled our cost.

    For all I know shareholders are not highly impressed by words, but for them numbers speak louder than words. Hence, I would steer the direction towards presenting the trend of main performance indicators during FY 2005-2009 to substantiate my claim for holding a strong financial structure. For reader assistance, graphs will be incorporated so that a mere glance can help examine the performance of the factor in hand.

    Liquidity position of the company has been showing a mixed pattern of increase and decrease but we have made secure investments in marketable securities which enables our net working capital to remain on satisfactory levels. Moreover increasing and consistently positive cash flows from operations improve the overall liquidity.

     Asset management has been impeccable with turnovers being quite stable in the last five years. It is the immaculate management which has made us pass recession in the last couple of years. Moreover, to support the increase in brand portfolio, it was a dire a need to manage assets as efficiently as possible and our teams have not disappointed our shareholders in this regard as well.    

    Profitability has been impressive during the last five years particularly by the advent of subsidiary brands generating greater revenue, expansion into global market and increased customer demand because of better and innovative products. This golden performance era has been reflected by our margins and returns which enabled us to provide double digit returns despite the severe economic recession hitting the global economy. In this regard, undoubtedly, we did have a fall but we took every possible step which could neutralize the shock of recession on our financial performance. Consequently, we cut costs to improve operational efficiency and provide consistent EPS and dividends to our shareholders. A worth mentioning factor here is the rising price of our stock in the market which itself is signal of investor confidence in our management abilities.  However, I would not remain ignorant to the decrease in profitability due to downturn in global economy however, we have been lucky to have controlled the extent of downfall, unlike many other players in the industry. It must be mentioned here that we have seen exceptional operating profit in the last year which is a strong evidence of our successful cost control implementation program.

    Last but not the least we have been witnessing rising sales and rising dividends per share in the last five years. Moreover, we have strategically planned to increase assets so that in the long run we can utilize our assets to generate revenue of 23 billion by FY 2011 as per our long term goal. Not only this but we have designed our capital structure in a way that it does not associate extensive financial risk to the company but it enables us to enjoy financial leverage so that we can have increased ROE each passing year, particularly in favorable economic conditions.

    Here, I must say that we are not only operating to increase the wealth of our shareholders, but we want to operate as a strong element working towards the betterment of our community. In this regard Nike foundation has introduced Girl Effect and Let me Play community projects, which is a small effort to establish the fact that children today become the leaders tomorrow.

    In the end I would conclude this letter by establishing the fact we are strengthened by strong brand loyalty, innovative products, powerful brands, operational efficiency and financial power. Hence, with economy glistening in the coming years, we are all set to move ahead with confidence in plans to grab better and even better opportunities.