SWOT Analysis And Financial Analysis: Nike's Profitability Analysis

• Profitability As the Table 1 showed above, NIKE has the steady ascending trend in profitability ratios. NIKE’s gross margin improved about 2.4%, from 2013’s 43.60% to 2015’s 46.00%. The gross profit margin measures a company’s abilities on cost control and setting sales price to customers. The ratio shows that NIKE has a stable performance on this ability. NIKE’s improved gross margin can be attributed to two factors, higher average net selling prices and growth in higher-margin direct-to-customer business (NIKE 10-K, 2015). And due to this enhancement, NIKE’s gross profit margin 46.0% was almost the same as industry’s average 46.20%. The higher selling price and higher-margin business also lead the operating profit margin and net profit margin to increase about 1% from 2013 to 2015. Normally, if the net profit margin is under 10%, it indicates that the firm is in a highly competitive business (Ventureline, 2015a). And comparing to the net profit margin of industry 10.2% or Adidas 3.29%, NIKE’s 10.7% also performed better in 2015. The Return on Total Assets (ROA) measures a firm’s ability of earning sales that every dollar invests on its assets. NIKE’s ROA was 14.10% in 2013, 14.50% in 2014 and 15.20% in 2015, and that inclined over 1% of the
To hold inventory is costly to companies, so companies would strive to lower the days of Days Inventory. The Days Inventory of NIKE over the past three years was, 86.71 in 2013, 87.74 in 2014 and 91.44 in 2015. This is not a preferable ascending trend, and it indicates that NIKE’s inventory management has been losing efficiency. On the other hand, NIKE’s Inventory Turnover showed an unfavorable direction, from 2013’s 4.21 to 2015’s 3.99. Although compared to industry’s average of 4.0 and Adidas’s 2.95 in 2015, NIKE’s performance is still at acceptable level. NIKE’s management should consider how to increase the efficiency of inventory flow