Nike Inc (NYSE:NKE) had a 7% revenue growth however shares of the company climbed more than 4% to an all-time high. The lower than projected growth happened due to fluctuations in foreign currencies.
If the foreign currency had not been a factor, then Nike’s revenue would have climbed by 13%. Nike’s overall growth outpaced its namesake brand. This shows that there are smaller, faster-growing source of revenue to make up the difference
An example of Nike subsidiary that has been doing very well is Converse. Its sales grew by 28% in the last quarter to $538. To get a measure of growth consider that Nike acquired Converse for just $305 million in July 2003.
The reason given for Converse’s explosive growth twelve years after its acquisition by Nike CFO Don Blair is better distribution in the U.S. and Europe.
Another reason for Nike’s growth could be legal. The company filed 22 separate trademark infringement lawsuits against 31 companies for their alleged use of core design elements of Converse Chuck Taylor shoes.
In the past, Nike had tried to avoid the courts and served around 180 cease and desist letters to defendants since 2008. However, when nothing stopped the flow of Chuck Taylor knockoffs into the market, Nike decided to go to the court.
The lawsuits are reportedly extremely effective. According t a report from Fashionista in February, Nike voluntarily dismissed a number of cases coming to agreements with prominent defendants like Tory Burchand Ralph Lauren.
The U.S. International Trade Commission (ITC) found 36 Ralph Lauren shoes in violation of Nike’s trademarks. As a result, Ralph Lauren agreed to pay not only monetary damages to Nike but also destroy all the infringing shoes.
Nike’s Converse brand was growing wellbefore the lawsuits came. However, the lawsuits have to a certain extent neutralized the competition. Converse appears poised to play an important role in dictating the fortunes of Nike shareholders.
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