“Swoosh!” describes the sound heard over China as Nike (NYSE: NKE) reorganized itself in August to better exploit opportunities it sees there.
Previously, China was part of Nike’s Asia Pacific operating segment, encompassing 13 countries. Now, Greater China has become its own operating unit, as Nike focuses on China’s youth.
At the company’s annual shareholders’ meeting in late September, Nike President and CEO Mark Parker called the Olympics in Beijing “the biggest win of all” for Nike in fiscal 2009. For 2009, Nike’s revenue in China grew by 22 percent year over year, on a currency-neutral basis. By comparison, its revenue growth in the U.S. for the same period was only 2 percent. However, during a year of economic crisis, Nike’s having grown revenue at all reflects a fierce global competitor.
Nike is the clear winner among its competitors, with a strategy to boost margins by eliminating its least-popular styles. The company has 600 to 700 styles in the works at any one time. According to Parker, “that’s too many … we’re really trying to edit the product down to fewer and better product.”
As Nike continues to promote events such as “The Nike+ Human Race,” it is sure to attract more and more Chinese youth. Last year, the race featured 780,000 participants worldwide.
Ask the Fool
Q: Is there a limit to how many shares of a company you can buy? – L.M., online
A: Yes. Companies don’t have unlimited shares. They issue a certain number when they go public via an “initial public offering” (IPO), and they may issue more later, via secondary offerings. You could buy all the shares on the market, but by doing so, your sudden demand for the shares would drive up the price. Once you own 5 percent of a class of shares, you’ll need to file a report alerting the Securities and Exchange Commission (SEC).
Note also that it can be very costly to buy up all of a company. If you own 2,000 shares, that might seem like a lot. But Nike, for example, has almost 500 million shares outstanding, and you’d need around $30 billion to buy them all.
Keep in mind that a company may only have 10 percent of its value in shares trading publicly. If a firm’s founder holds 60 percent or 90 percent of the company, then she still controls it.
Q: Where can I access earnings reports that companies file with the SEC? – R.T., Davenport, Iowa
A: Many Web sites, such as ours, include access to these filings in their stock data offerings. For example, enter a ticker symbol at http://caps.fool.com and then click on the “SEC Filings” tab. You can also go right to the source at www.sec.gov (look under “Filings & Forms”).
My dumbest investment
My first stock purchase, in the 1980s, was from a cold-calling broker who sold me on a recently reorganized regional air carrier that “was positioned to do well.” When I checked on the stock a few times, it had barely budged. But then, six months later, it was suddenly bankrupt. I knew nothing about investing or airlines. Later I found out that the shares were from the broker’s inventory, from a secondary stock offering that had been executed to get capital to avoid bankruptcy, as it turned out. I’ve since noticed that I’ve never purchased a product or service that was presented over the phone or in the mail where I ended up happy with the result. So today, if I haven’t initiated the contact, a sales pitch gets an automatic “no.” – Stan Ward, Dayton, Ohio
The Fool Responds: That’s a smart policy. We should dig into companies before investing in them, and we would do well to be extra careful with airlines. That’s a very tough business, facing frequent fare wars, fuel price volatility, costly empty seats, unpredictable weather complications and expensive equipment, among other things.