Nike Inc (NKE) Surpasses Adidas In Europe [SURVEY]

Nike Inc (NKE) Surpasses Adidas In Europe [SURVEY]

Citi Research analysts Kate McShane, Corinna Van der Ghinst and Christopher Weng maintain a Buy rating for Nike Inc (NYSE:NKE) as they examine the results from their independent survey.

Nike FYQ3 European survey

We conducted a survey of 185 independent Nike retailers in Europe on their sales trends during Nike Inc (NYSE:NKE)’s FYQ3’14 (ending Feb ’14) & upcoming expectations. Western Europe is Nike’s 2nd largest segment behind North America at ~18% of sales & ~20% of EBIT. Following declines in FY13 & brand repositioning, sales have started to grow again in the past 2 qtrs, w/reported futures in the region increasing +12% in Q1 and +23% in Q2. We expect re-acceleration in W.Europe & stabilization in China to help mitigate potential slowdowns in N.America (cont’d growth, but comping 3yrs of +DD revs) and EM.

Survey suggests W. Europe comped up in Q3

Based on our survey results, average footwear sales for our respondents increased +3.6% y/y, while athletic apparel grew +2% y/y during FYQ3 (Dec – Feb). By country, the strongest growth came from the UK, with footwear up +6% y/y and apparel up +4%, followed by Germany. Our survey also indicates that the sales growth in Q3 was mostly unitled, which we view as a positive given premium pricing on Nike products in Europe.

Nike is the top-selling brand, surpassing Adidas

In contrast to the latest annual 2012 data from Sporting Goods Intelligence, which gives Adidas the share advantage in Europe for combined apparel/footwear (~23% vs. Nike’s ~19%), retailers across the 5 countries we surveyed identified Nike as their top-selling brand, followed closely by Adidas AG (ADR) (OTCMKTS:ADDYY) (ETR:ADS) . 56% of retailers we spoke to believe that Nike continues to gain share, and that it is doing so at the expense of Adidas (34% of respondents), followed by Puma, Asics, & Reebok. We believe Nike Inc (NYSE:NKE) can take addt’l share in Europe as it continues to innovate w/ on-trend running, apparel, & football (soccer) styles and basketball continues to pick up momentum, similar to US trends.

Nike remains best in class

While Nike Inc (NYSE:NKE) shares are up 18% in the past 6 months, we continue to see upside from robust top-line growth, gross margin expansion opptys, & share gains. Nike remains best-in-class on product innovation, supply chain, and global diversification. Reiterate Buy and $90 TP.