Nike Inc expects its revenue to rise more than 40 percent to $27 billion by 2015, helped by new stores and demand for its namesake brand and smaller brands like Converse, the athletic giant said on Wednesday.
We're going to continue to build, fuel and accelerate the Nike portfolio, said Chief Executive Mark Parker, addressing a crowd during an investor day held in New York.
Tremendous opportunity still exists to grow the Nike brand organically, and the company will continue to launch game-changing innovations, Parker said.
Some $23 billion of that overall $27 billion revenue target will come from the Nike brand itself, executives said.
The world's largest athletic shoe and clothing maker is stressing growth in emerging markets and through its younger non-Nike brands as it faces largely mature markets in the United States, Europe and Japan.
Company executives listed different businesses that would double in size within five years, from Nike's China business to its owned stores and online unit to popular brands like Converse and Hurley, currently worth $2 billion and $200 million, respectively.
The company, whose signature swoosh logo is recognized around the world, derives most of its profit from Nike-branded gear, but its smaller brands are among the fastest-growing, in part because they extend the reach of the athletic company.
Think of Converse as an inspired-by-basketball brand. It drifts into other areas -- into music, into rock and roll ... where Nike wouldn't go, said Eunan McLaughlin, president of Nike's affiliates unit.
Converse is only owned and managed by Nike in the United States and Canada, leaving room for Nike to expand earnings and revenue as it takes control in China and the U.K., he said.
Shares of Nike are up 41 percent since January 2009, but fell 2.8 percent on Wednesday.
Susquehanna Financial analyst Christopher Svezia said there was a lot of hype before the meeting, as many investors hoped for news regarding Nike's retail strategy.
People like what they're saying but I don't know if anybody's getting their socks knocked off, Svezia said. It's not a revolution, it's an evolution. He said investors may also have concerns about the costs of Nike's planned growth.
SMALLER, FOCUSED STORES
Beaverton, Oregon-based Nike posted overall revenue of $19.2 billion in its full fiscal year ended May 31, 2009.
Parker reiterated the company's long-term growth targets, which call for high-single-digit revenue growth and earnings per share growth in the mid-teens on a percentage basis.
Nike Brand President Charlie Denson said the growth of the middle class around the world would guide the brand to new audiences. Over 70 percent of the company's future growth would come from outside North America, executives said, from 60 percent today.
Nike's China business -- its second-biggest market -- will double within five years, the company said.
Nike sells mainly through wholesale channels, but also operates its own fleet of stores, including 472 factory stores in 33 countries.
In an interview on the meeting's sidelines, CEO Parker said Nike's store expansion would focus on smaller stores instead of the very large Niketown stores it opened in the past.
I don't think you'll see more of the ... mega footprints that we have today as much as smaller footprints that we can showcase the best of the category product, Parker said.
In addition to stores that focus on a particular brand like Nike or Converse, Jeanne Jackson, head of Nike's direct-to-consumer business, said there would be more smaller stores focusing on a single category, like soccer or running.
The company expects to add between 250 and 300 owned Nike stores across the globe within five years. It is planning a related $500 million to $600 million in capital spending over that same period.
It expects the direct-to-consumer businesses -- which includes its owned stores and online business -- to double by 2015. It was about $2.4 billion in fiscal 2009.
Parker said the company's cumulative free cash flow from operations should hit $12 billion by 2015. Nike will continue to grow its dividend and will spend $5 billion in share buybacks over the next five years, he said.
Nike shares closed at $75.21 on the New York Stock Exchange, down $2.14.
(Reporting by Martinne Geller and Alexandria Sage, writing by Alexandria Sage, editing by Dave Zimmerman and Gunna Dickson)