Four Reasons Nike Is So Hot Right Now

Nike Inc NKE has become synonymous with athletic apparel after a decade of domination in the industry.

Over the past year, Nike shares have seen a 35 percent increase. However, while its past success has been impressive, many investors have been looking to the company's future for even more gains.

DTC On The Rise

In its Q3 earnings report, Nike boasted a 2 percent rise in direct to consumer sales (DTC) from the same time last year.

The company's online sales helped boost DTC sales to account for 22 percent of total sales. Nike.com saw a 42 percent increase, as both traffic and conversion picked up.

The company's CEO Mark Parker said that the company's investment in improving the mobile experience appeared to have paid off, as mobile traffic surpassed desktop users for the first time ever.

DTC sales are an important part of increasing a company's bottom line, as they eliminate the middleman and increase profit margins.

Related Link: Is Nike Involved In The FIFA Corruption Scandal?

Potential For Growth

Although Nike has become a household name across the globe, the company says it still has huge growth potential. Consumers are becoming increasingly focused on leading healthy, active lifestyles at a time when purchasing power is increasing – this represents a major opportunity for Nike.

The company also believes there is room for growth in its women's apparel; Nike forecast a $2 billion increase in that segment by 2017.

Political Factors

Nike also stands to benefit from President Obama's push to create an Asian trade pact. As Nike already outsources most of its manufacturing due to cheaper labor costs, relaxed trade rules would make the company's products cheaper to be shipped back to the U.S. for sale.

Current trade restrictions mean that Nike must pay tariffs on its goods when they return to the States, but relaxed rules would likely eliminate some of those extra fees.

Related Link: Will Trade Deals Benefit The U.S.?

Sponsorship deals

Nike is set to become the official sponsor of the National Basketball Association from 2017 through 2025, a deal that will allow the company to supply jerseys, shorts and warm-up gear used by NBA teams.

The deal will cement Nike's hold on the basketball industry, where its shoes already dominate the market. Nike's NBA deal also allows the Nike logo to be displayed on the uniforms, something that other sponsors like adidas AG (ADR) ADDYY have been prohibited from doing.

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