Nike Keeps Running Ahead of the Pack
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.
Last week Nike (NYSE: NKE) launched its new Nike + Fuel Band, a wrist band that tracks the user's activities such as running, different training methods or practicing sports. The digital device also measures everyday activities like walking to work, using the stairs or dancing.
The product measures and documents activity by time, steps, calories and a new metric called NikeFuel with the idea of encouraging users to set and surpass new goals each day. The wristband, which will be available at a suggested retail price of $149, is water-resistant and comes with an internal USB. According to the company the battery life of the device is around four days.
The FuelBand measures motion and translates it into NikeFuel -- users can set a daily goal for activity and NikeFuel. The wristband has lights that move from red to green as the level of activity is closer to the stated goal and has a very simple user interface. The device connects through its built-in USB to the Nike+ Website or through Bluetooth to a free iPhone app to record activity each day and track progress.
Social media could be a big part of the experience -- Nike has partnered with Facebook, Foursquare and Path with the idea of encouraging users to upload their statistics online and share them through social networks. This is not the company's first incursion into the digital space; in 2006 Nike launched a partnership with Apple to sell the Nike+ iPod Sport Kit, a wireless system that provided connectivity between footwear and Apple's electronic gadgets. Nike+ was a big success; it currently has more than five million users.
The product has some promising perspectives. It's really helpful to accurately measure performance and keep track of physical activity in order to make permanent progress. Also the social aspect of this technology could be really attractive; people enjoy feeling proud about their progress and letting everyone know about it through social networks. Getting encouragement from friends and family can be a powerful incentive.
People with a competitive spirit should find many benefits in this technology that allows users to easily compare performance with other people, improving in that way the competitive experience.
The device is also very inclusive because it's useful for people with very different athletic habits: a basketball player, someone who takes walks in the afternoons or a regular swimmer can benefit from the new FuelBand and even compare their NikeFuel statistics.
Nike seems to be immune to the negative economic climate so far. During the launch of the Nike+ FuelBand Mark Parker, CEO of the firm commented to Reuters: "During times of economic challenge, consumers will go to brands that they trust and can connect with. We have not seen the economy have a dramatic impact on the sales of our products, not just in the high end, but also in the mid-priced range."
The company sees strong growth prospects in China; it recently announced plans to build a 600,000-square-foot regional headquarters in Shanghai, to get better-positioned to serve the growing Chinese market. "I frankly think we have only scratched the surface when it comes to China," Parker said. The Chinese market, which is currently about 11 percent of total sales, grew 35 percent during the quarter ended Nov. 30. As this high growth market becomes a bigger proportion of total sales the company's financials should benefit.
The stock has recently made new historical highs at $102 per share, but its valuation seems reasonable. Nike trades at a forward P/E of 17.5, which may be higher than the valuations attributed to other companies in the industry, but not too excessive considering Nike's quality. The company has a unique brand presence, strong leadership position and a solid track record of delivering innovative high-quality products. Any pullback in price can be considered a buying opportunity.
Motley Fool newsletter services recommend Nike. The Motley Fool has no positions in the stocks mentioned above. acardenal has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
