SBD/September 11, 2013/Finance

Nike's Addition To Dow Jones Industrial Average Seen As Sign Of Size, Stability

Nike expects sales to reach as much as $30B in the next two years
The addition of Nike to the Dow Jones Industrial Average is "a testament to the company’s ability to shrug off hard times and transcend its U.S. origins," according to Matt Townsend of BLOOMBERG NEWS. Nike "will join the 30-member gauge when the market opens on Sept. 23," along with Goldman Sachs and Visa. The three companies will replace Bank of America, HP and Alcoa. Nike has turned in 10% compound annual sales growth in the past three years and "it expects those gains to continue" and for sales to reach as much as $30B in '15 (BLOOMBERG NEWS, 9/11). McAdams Wright Ragen analyst Sara Hasan said, "There's definitely a prestige factor and a sense that Nike is a large enough, stable enough company that it represents the overall economy and the market" (BIZJOURNALS.com, 9/10). CNBC contributor and optionMONSTER.com co-Founder Pete Najarian said adding Nike to the Dow is a "play on the Asian market in a big way" ("Halftime Report," CNBC, 9/10). Bloomberg TV's Julie Hyman said Nike is the only company of the three that joined the DJIA "that actually qualifies -- loosely at least -- as an industrial." Hyman: "They actually make something and the company has done well. Obviously, it is a global brand at this point." Hyman added, "The fact that the stock has done well certainly doesn't hurt its case when it comes to entering the Index. (But) analysts are actually pretty split when it comes to Nike" ("Street Smart," Bloomberg TV, 9/10).

READY FOR THE CHALLENGE
: Under Armour Founder, Chair & CEO Kevin Plank appeared on CNBC's "Mad Money" last night, and host Jim Cramer asked with Nike being "eight times your size, why don't you fear Nike more?" Plank responded, "We focus on ourselves … (but) we recognize we've got really good competition in our industry and I think that's good for everybody. But at the same time, there was a time when … no one was allowed to bring any competitive product in our building. It's important for us to be aware of what's happening, but there is so much opportunity for us. It's our job to dictate the tempo. It's our job to talk about the direction we're going in, and not looking for cues or keys from anybody else. We're just getting started."

BRAVE & BOLD
: Cramer called UA "one of the best-run, most innovative companies in the entire apparel space." Cramer compared UA to Apple, because it is "a technology company, and then ... an apparel company." Plank said, "I think you were the first one to say that a couple years ago and it was insightful. We've obviously been working like that for a very long time, but that's exactly how we see ourselves." Plank discussed UA endorsers and said, "If I have to pay you to compel or convince you to wear my sneaker or wear my shorts or wear my top, it's game over from the get-go. ... It's not unlike some of the key relationships we have out there, people like (Patriots QB) Tom Brady. This is not a guy who is an endorsed athlete, this is a shareholder who is calling me up after the quarter and saying, 'Good job.'"

WAVES OF THE FUTURE
: Plank said UA is very innovative, but they "want to embrace the entire cloud." Plank: "We don't want Under Armour just to be 40 people within our walls coming up with the next big idea. We're saying that if you're an entrepreneur, if you're an innovator, if you're a 23 year-old kid with an idea for a better t-shirt … instead of you going to try and start that company yourself, why not bring that idea to us." Only 6% of UA sales are int'l, and Cramer asked, "Can Under Armour be the company that comes to China?" Plank: "We've been at this since 1999 when we opened our first partnership in Japan. But the thing to know about international, it takes time. It takes time and it takes leadership" ("Mad Money," CNBC, 9/10).
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Nike, Finance, Under Armour

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