If you had invested $1,000 during Nike's initial public offering (IPO) without reinvesting dividends, your investment would be worth nearly $190,000 as of February 2021. This represents almost a 200x return.
- Nike is a leading global brand making sneakers and athletic wear for sports professionals and ordinary people alike.
- Nike first began as Blue Ribbon Sports in 1964 and became incorporated as Nike in 1971. Since its humble beginnings, when the company was worth just $1,200, it has become one of the world's largest and most well-known sportswear brands.
- In December of 1980, NKE shares IPO'd at $10.50 per share at the time. After several stock splits and a rise in share value, that would have produced a nearly 200x return today.
History of Nike
Nike began as Blue Ribbon Sports in 1964. Co-founder Phil Knight created the name shortly before a meeting with a Japanese shoe manufacturing company. Knight was representing a company he hadn't even started yet. Blue Ribbon Sports sought to find lighter and more durable shoes for runners.
Bill Bowerman and Phil Knight developed the name Nike in 1971. Jeff Johnson helped to create the name, iterating from the Greek Goddess of Victory. 1971 was a big year for the company. Along with the name change, Co-Founder Bill Bowerman created the first Nike shoes, the waffle trainers. While making waffles, Bowerman thought the pattern would lead to increased grip for runners. In 1971, Nike also paid $35 for the creation and design of its swoosh logo from Portland University student Carolyn Davidson. She was later given a swoosh ring and stock in the company for her contribution.
In 1972, Nike signed its first athlete endorsement contract with tennis professional Ilie Nastase. Athletic endorsement deals would prove to be an essential part of the Nike marketing strategy going forward.
Rise of an Empire
Nike's move into basketball was aided by the endorsement of Michael Jordan in 1984. Its signature shoe, the Air Jordan, was initially banned by the National Basketball Association (NBA), drawing a wave of free publicity to the company. In 1986, Nike revenues passed $1 billion for the first time.
The success of Jordan's endorsement deal with Nike led to many other successful partnerships. Nike has signed endorsement deals with stars or teams from every major sport around the world. In 2011, the company secured a five-year contract with the National Football League (NFL) to be the exclusive provider of player apparel. They have continued the contract with renewals including the most recent in March 2018 for eight years.
The company continues to battle German rival Adidas for control of the international soccer market and has signed many top soccer players to endorsements. In the first quarter of 2019, the company spent $964 million in demand creation which includes advertising, promotions, and endorsements.
Nike's famous "Just Do It" slogan was released in 1988. The first Nike store opened in 1990 in downtown Portland, Oregon, also the location of the company’s headquarters. Nike's first acquisition was made in 1988 with the purchase of Cole Haan. Other acquisitions include Bauer Hockey, Hurley International, Converse, Starter, Umbro, Virgin Mega USA, Zodiac, and Invertex. In an effort to focus on its core brands, Nike began divesting companies in the late 2000s, selling Starter, Bauer Hockey, Umbro, and Cole Haan.
Nike’s stock was launched to the public markets in an initial public offering (IPO) on December 2, 1980. The IPO price at the time was $10.50 cents. Adjusting for stock splits over the years this translates to $0.75, not adjusted for inflation. Adding in the effects of inflation (as of Feb. 2, 2021), that is the equivalent of just $0.24 in today's dollars.
In 1980, $1,000 at the time would have bought 95.24 shares (assuming you could own fractional shares). The stock then split 2-for-1 seven times since then. After stock splits an investor would have 1,333.36 shares for a total value of $186,670.40 at today's share price of $140 (as of Feb. 2, 2021).
Nike began paying a quarterly cash dividend in 1984. Since 2004, the company has also been steadily increasing the dividend on an annual basis. In the TTM through October 2018, Nike has paid 77 cents per share in dividends.
The Bottom Line
Nike is a successful company with steady revenue. In the TTM through October 2018 it has revenue of $37.3 billion with a gross margin of 44% and a three-year annualized revenue growth rate of 5.95%. It is a top company in the Dow Jones and continues to attract value and income investors. It has a one-year total return of 47.58% through October 2018 and a dividend yield of 1.07%.