Nike (NYSE:NKE) has not only grown to be the largest sporting apparel and footwear company but also one of the most valuable brands worldwide. It joins the ranks of companies such as Coca-Cola, Apple, and Microsoft. The Nike share price hit an all-time high this week at $162.43 before closing on Tuesday at $161.59. This recent spike was inspired by the impressive 2021 Q4 earnings report, which beat analyst expectations. Can the Nike share price continue to climb from here? And should I consider adding this business to my portfolio? Let’s take a look.

What is Nike’s business?

Nike designs, develops, and sells athletic footwear, apparel, equipment, and accessories worldwide. The company’s products are divided into six categories: Nike Basketball, Football, the Jordan brand, training, and sportswear. 

Nike’s powerful brand has helped to ensure its share price having a good run. The stock is up over 179% in the last 5 years. That’s quite impressive, in my opinion.

Nike’s 2021 fourth-quarter results.

Before announcing the 2021 fourth-quarter earning results, the Nike share price lagged the market. But after publication, that quickly changed.

The firm reported revenues of $44.5 billion, up by 19% compared to 2020 results. Direct sales also increased by 73% to $4.5 billion. Meanwhile, diluted earnings per share came in at $3.56.

While speaking on the conference call, the President & CEO, John Donahoe, said, “Nike’s strong results this quarter and full fiscal year demonstrate NIKE’s unique competitive advantage and deep connection with consumers all over the world.” He stated further that “FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace. Fueled by our momentum, we continue to invest in innovation and our digital leadership to set the foundation for NIKE’s long-term growth.” 

The effect of Direct-to-Consumer and digital sales on the Nike share price.

In 2011, about 84% of Nike’s sales were done through third-party vendors. While its direct to consumer sales accounted for only 16%.   

But in recent times, the management team has altered its distribution strategy to favour a direct-to-consumer approach. It is focusing more on growing its direct to consumer channels in its “Just do it” fashion. The company announced the change of tactic back in 2017. Since then Nike’s direct sale has been increasing.

In line with this, the company had to end supply agreements with some independent contractors. In its 2021 fiscal year, the company reported that direct sales rose to approximately 39% of Nike brands sales. On the other hand, wholesale accounted for about 61% of sales.

I believe this direct sale strategy will attract more revenue for the company moving forward. And with it, renewed investor interest that will likely push the Nike share price higher over the long term.

What is Nike up against?

Despite being a leading brand, with a 27.4% market share of the sporting apparel market, the company still has to fend off serious competition. Nike’s main competitors are Adidas, Under Armour and Puma. Given its products are often seen as a fashion item, if the company cannot keep up with consumer trends faster than its competitors, this market share may begin to decline.

Moreover, if not well implemented, the direct sale strategy could equally adversely affect the revenue-generating capabilities of the company. Needless to say, that would not be good news for the Nike share price.

Can the Nike share price climb higher?

Overall, despite the risks, I think the Nike share price can continue to rise, assuming it can continue to innovate new popular products. Therefore with a powerful brand and spectacular performance so far, I am considering to add Nike to my portfolio as a long term investment.