NIKE NKE

1. NIKE (NKE) April 17, 2008 Wendy Ying, Brent Speed, Gage Caligaris

2. Firm Overview Founded in 1964 Design and development footwear, apparel, equipment, and accessory products Largest seller of athletic footwear and apparel in the world Operates in NIKE-owned stores and other retail accounts in over 180 countries Footwear designed for both athletic use and casual wear Top-selling product categories are: running, training, basketball, soccer, sport-inspired urban shoes, and children�s shoes

3. Industry Analysis � Porter�s Five Buyer Power Moderate power over its buyers Biggest seller of athletic footwear and apparel gives it leverage over retailers However, consolidation in the sector proves to be a danger to this power. Supplier Power High in terms of labor Low in terms of commodities required as inputs

4. Rivalry: �Intense� Face competition from plethora of companies like Adidas, K-Swiss, New Balance, UA Technological advances provide challenge Substitutes: Low to Moderate At broadest level, all consumers need footwear and apparel However, for leisure uses, consumers can switch to �lifestyle� brands like DECK and SKX Barriers to Entry: High $, Regulations, IT infrastructure, access to retail

5. Firm Analysis � SWOT Strengths Extremely strong brand name Largest market share in the industry (40% in the US and 37% in the world) Influential endorsements in various athletic areas 53% of revenue comes from overseas, which is beneficial in the face of the weak dollar Has outperformed despite US market weaknesses 16% revenue growth in Q3 Strong sales from subsidiaries

6. Weaknesses Virtually all footwear and apparel are manufactured outside the U.S. Exposed to currency fluctuations and workers� strikes Increasing costs of endorsements Need to constantly respond to trends and shifts in consumer preferences Heavily dependent on consumer spending Firm Analysis � SWOT

7. Opportunities Olympics in August 2008 European Football Championships in June 2008 Summer sports Expansion into Latin America and EMEA regions Threats Intense retail competition Adidas, Under Armour, New Balance Firm Analysis � SWOT

8. NKE Valuation Metrics

9. Competitor Analysis

10. Competitor Analysis

11. Global Footwear Market Share 2006:

12. CAPM

13. WACC Percent equity = 65% Percent debt = 6% Cost of equity = 0.08743 Cost of debt = 0.0625 WACC = 8.50%

14. Discounted Cash Flow Estimated 8% revenue growth for 6 years, then 5% revenue growth for 3 years Terminal growth = 3% Operating income estimated to be 13% of revenue for first 3 years, then 12% for next 6 years Tax rate = 32% Depreciation 1.9% Cap Ex = 1.8% Estimated share value: $70.18 Current share price: $67.55

15. Market Conditions Challenging but manageable US same store sales declined about 2.5% in March excluding Wal-Mart after lackluster Jan. and Feb. NKE however, proved resilient as US revenue grew 5% in footwear and 10% in apparel in Quarter ending in Feb. With 53% sales from overseas, NKE can compensate for weak domestic economy

16. Demand for NIKE Products Difficult for Nike to grow more in US market 45% athletic footwear market share 95% basketball shoes over $100 Potential for growth in new product areas Teaming up with Apple to help incorporate iPod equipment into athletic apparel Large potential growth in China $1B in sales per year in China Expansion of consumer base as per capita incomes grow (currently at $3,000/capita).

17. Conclusion Solid company with brand name and trademark �swoosh� famous around the world Performed well in Q3 despite weak market conditions Expanding sales and outlooks in China, Latin America, and emerging markets in EMEA Many new opportunities coming up this year