NIKE, Inc. (NKE) Needs to Overcome These Hurdles

Also, Nike needs to keep a close eye on yet another competitor in North America, which is the formidable Adidas (NASDAQOTH:ADDYY). The company’s $150 running shoes, which are supposed to provide more comfort to the runner, might hurt Nike in the long run. Adidas is a far smaller player than Nike but the company is following a good strategy to take market share away from Nike. Adidas is looking to use its “Bounce” technology in tennis, basketball etc. after its running shoes hit decent adoption rates.

Adidas might be way behind Nike in North America, standing in sixth place, but the company’s latest move of introducing its new technology might help it gain momentum. In fiscal 2012, Adidas’ North American revenue grew 2% on a constant currency basis, which by no means is stellar. But with the new technology and the fact that Adidas will be making a solid push to sell them through partnerships with the likes of Foot Locker, Inc. (NYSE:FL), there is the probability that it can eat into NIKE, Inc. (NYSE:NKE)‘s share.

But to counter such competitors, Nike is diversifying and focusing on innovation through different products such as Nike+ App, GPS sports watch, Nike+ Fuel Band, Sweat free apparels, etc. which would track daily routine workouts and intakes.

Conclusion

Nike has been a good performer so far but it faces some challenges. A slowdown in the Chinese economy and the rise of potent competitors in North America might trouble the company going forward. But its diversification and presence across different market is still a good reason why investors might continue to stick with their long positions in Nike.

The company does have a strong brand and it is yet another reason why it is an attractive stock to buy. But if you do want to add to your NIKE, Inc. (NYSE:NKE) position despite the challenges, you would be better off monitoring the situation in China and moves of its competitors and decide to what extent they might trouble the company.

The article Nike Needs to Overcome These Hurdles originally appeared on Fool.com and is written by Amal Singh.

Amal Singh has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Amal is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.