Vivek Mohan, Pye Yuan, Natasha Chou, Brian Childs, Letian Dai

Agenda
Our Recommendation: HOLD Business Description Industry Overview Competitive Positioning Revenue and Margin Drivers Valuation Financial Analysis Investment Risks Q&A Session

Business Description
Founding and History
Founded in 1964 as Blue Ribbon sports - originally a distributor Became Nike in 1978 now a global iconic brand Ever since Nike was established, innovation has been a key driver to the companys success

Management
Founded in 1964 as Blue Ribbon sports - originally a distributor Became Nike in 1978 now a global iconic brand

Business Description
Leader in Innovation
Nike Sports Watch Nike Plus Fuel Band iPod Nike app Shox Dri-Fit

Product Mix
Corporate restructuring
Sold Umbro and Cole Haan in 4Q 2012 to refocus business model Focus on Jordan, Converse, NIKE brands
Expected: Increased profit margins and dividends

NIKE Gross Margin

47.00% 46.00% 45.00%

44.00%
43.00% 42.00% 41.00% FY 2010 FY 2011 FY 2012

Gross Margin

Sales Mix
FY 2012 Sales Mix
Equipment 6% Global Brand Divisions 1%

Apparel 30%

Footwear 64%

Growth Strategy
Focus on China
Utilizing Basketball and NBA Players to raise awareness Targeting the youth market 17% Growth from FY 2010 to FY 2011 23% Growth from FY 2011 to FY 2012 Reveue from China
$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 FY 2010 FY 2011 FY 2012 11.00% 10.50% 10.00%

Percentage of Total Revenue

Reveue from China

9.50% 9.00% 8.50% 8.00% FY 2010 FY 2011 FY 2012

Percentage of Total Revenue

Industry Overview
Nike is the leading player in the athletic footwear industry
Company Market Cap.

NIKE (NYSE)
Adidas (FWB) Under Armour (NYSE) Asics (TYO) Sketchers (NYSE)

$54.82 billion
$16.6 billion $5.87 billion $3.60 billion $1.13 billion

Industry Overview
Company Nike Adidas Group (includes Reebok) Puma Fiscal 2010 $10,301 $7,021 (5,389) $1,856 (1,425) $1,759 (165,808) Fiscal 2011 $11,518 $8,132 (6,242) $2,006 (1,540) $1,857 (175,057) Fiscal 2012 $13,426 $9,018 (6,922) $2,078 (1,595) $1,940 (182,807) CAGR (20102012) 14.2% 13.3%

5.8%

Asics

5.0%

SWOT Analysis
Strengths
Global Market Leader with Iconic Brand Name Heavy emphasis in R&D Share buyback program will restore shareholders confidence in company

Opportunities
Potential to penetrate relatively unsaturated emerging markets Product Development Nike is arguably a fashion brand and has potential to market to fashion forward youth culture

Weaknesses
Labor and factory conditions has hurt the companys publicity Nike has wasted resources in the past few years by investing in a fashion focused company

Threats
Fierce sponsorship competition from Adidas and other well known brands Possibility of having unforeseen losses due to currency fluctuation

Porters Five Forces

Factor Buyers Power Score Description

Neutral

Buyers have many different options when it comes to which brand they choose. However, they have very little influence over prices. Suppliers have very little power since they are supplying raw materials and there is no differentiation from one supplier to another. There are many different brands with similar products offered at similar prices. There is little differentiation between products of one brand and products of another. Brands that are already in the market have built brand equity that can be difficult to challenge.

Suppliers Power

Weak

Industry Rivalry

Intense

Threat of Substitution

High

Barriers to Entry

High

Valuation

DCF: $48.91 to $57.29 Key assumptions

Valuation Date Revenue Growth Terminal Value

Valuation

Comparable Model: $38.82 to $62.31

Competitors PE TEV/EBITDA TEV/REVENUE

Residual Income: $49.91 to $79.19

LT Growth of 1.5%

Valuation

- Final Price Range $49.91 to $57.29 - Market Price at Valuation Date: $59.53

Revenue and Margin Drivers

Revenue Drivers
Focus on the consumer Research and Development

Margin Drivers
Low Manufacturing Cost Adapting to global economies

Financial Analysis
Revenue, Net income and Profit margin
30,000.0 12.00%

25,000.0

10.00%

20,000.0

8.00%

Revenue(M) 15,000.0 6.00% Net income(M) Profit Magain(%) 10,000.0 4.00%

5,000.0

2.00%

0 2008 2009 2010 2011 2012

0.00%

 Sale of Umbro to Iconix (December 2012)

EBT Excl. Unusual Items

2,442.3

2,553.0

2,517.0

2,844.0

3,007.0

3,087.0

Restructuring Charges Impairment of Goodwill Gain (Loss) On Sale Of Assets Asset Writedown Other Unusual Items EBT Incl. Unusual Items

(195.0) (199.0) 60.6 (202.0) -

(24.0) (24.0) -

2,502.9

1,957.0

2,517.0

2,844.0

2,983.0

3,063.0

 Working capital and Free cash flow

4,500 4,000 3,500 3,000 2,500
Working capital

2,000 1,500 1,000 500 0

2008 2009 2010 2011 2012

Free cash flow

Working capital decreased by $782 million from $3,377 million in 2009 to $2,595 million in 2010 because of the increase of cash and cash equivalents

Investment Risks
Financial results may be adversely affected if substantial investments fail to produce expected returns Risks associated with overseas sourcing, manufacturing, and financing Concentration of retail market share among a few retailers may increase Nikes credit risk and ability to sell their products

Conclusion
Our Recommendation: HOLD
A global iconic brand name Penetrating relatively unsaturated markets globally Refocusing its business model on its core competency Steady increase in dividends Stock buyback program will restore shareholder confidence

Q&A Session

Appendix

Appendix