Nike vs. Adidas: Who’s Running the Show?

Authorship and acknowledgement

This finance assignment is a product of my work. I used the proper academic sources, presented in-text citations and recorded a final reference list

Nike, Inc. Financial Analysis Report

1. Introduction

The global apparel and sports footwear market is shaped by innovation, evolving consumer preferences, and macroeconomic factors. Nike, Inc., as a leading brand, has maintained its dominance by leveraging its strong brand, operational efficiency, and product innovation. However, in the face of growing competition, particularly from Adidas AG, it is essential to assess Nike's financial performance to determine its investment potential. This report focuses on analyzing Nike's financial health from 2019 to 2023 through key ratios related to liquidity, profitability, efficiency, and gearing, while also comparing it to its competitor, Adidas.

Liquidity ratios, such as the current ratio and quick ratio, shed light on Nike’s ability to meet short-term obligations. Profitability ratios, including return on equity and net profit margin, assess how well Nike generates profit. Efficiency ratios, such as inventory turnover and receivables days, reflect the company’s operational effectiveness. Gearing ratios, such as debt-to-equity and interest coverage, offer insights into Nike’s financial risk. By comparing these ratios to Adidas, the report evaluates Nike’s competitive position.

Additionally, macroeconomic trends and industry-specific developments, such as shifts in consumer behavior, sustainability, and e-commerce growth, are considered to understand their impact on Nike’s performance. These factors are critical for evaluating Nike's financial outlook and its potential attractiveness to a potential acquirer.

This analysis provides a comprehensive view of Nike's financial performance and highlights key areas of strength and opportunity relative to Adidas.

2. Financial Analysis

This section delves into the calculation and interpretation of financial ratios for Nike, Inc., comparing them with Adidas AG to highlight strengths and areas for improvement.

2.1 Liquidity Ratios

Current Ratio

: The current ratio measures Nike’s ability to meet its short-term obligations with its short-term assets.

From 2019 to 2023, the current ratio of Nike and Adidas demonstrates differing trends in liquidity and financial flexibility. Nike's current ratio consistently increased over the period, moving from 2.10 in 2019 to 2.74 in 2023. This suggests that Nike became increasingly capable of covering its short-term liabilities with its short-term assets, signaling strong liquidity management. In contrast, Adidas experienced a decline in its current ratio, dropping from 1.25 in 2019 to 1.22 in 2023. This indicates a slight tightening of its liquidity, suggesting that Adidas faced more challenges in covering its short-term obligations compared to Nike. Despite both companies maintaining healthy current ratios overall, Nike's growing ratio reflects a stronger liquidity position, while Adidas' slightly decreasing ratio could raise questions about its ability to efficiently manage short-term financial obligations.

Quick Ratio

: The quick ratio excludes inventory to assess immediate liquidity.

From 2019 to 2023, Nike’s quick ratio consistently outperformed Adidas, indicating stronger short-term liquidity. Nike’s quick ratio improved from 1.60 in 2019 to 1.80 in 2023, signaling effective management of its liquid assets relative to its short-term liabilities. In contrast, Adidas experienced fluctuations, with its quick ratio decreasing from 1.00 in 2019 to 0.90 in 2023, suggesting that the company’s ability to cover short-term liabilities with its most liquid assets weakened over time. This comparison highlights Nike’s stronger financial flexibility compared to Adidas in managing short-term obligations.

Operating Cash Flow to Current Liabilities

Nike consistently outperforms Adidas in this ratio, indicating that it generates stronger cash flow relative to its current liabilities, demonstrating better liquidity and financial flexibility

2.2 Profitability Ratios

Gross Profit Margin:

This ratio indicates the percentage of revenue remaining after deducting the cost of goods sold.

From 2019 to 2023, Nike's Operating Cash Flow to Current Liabilities ratio generally remained higher than Adidas's, signaling better liquidity management. Nike's ratio improved from 0.85 in 2019 to 1.10 in 2023, reflecting a stronger ability to generate cash from operations relative to its current liabilities. On the other hand, Adidas saw a decline in this ratio, dropping from 0.65 in 2019 to 0.55 in 2023. This indicates that Adidas faced more challenges in covering its short-term obligations with cash flows from operations compared to Nike, suggesting relatively weaker operational liquidity.

Operating Profit Margin

This ratio measures the percentage of revenue remaining after covering operating expenses. Nike’s superior operating profit margin highlights its more effective cost control and operational management, allowing the company to retain a higher portion of revenue as profit compared to Adidas.

Net Profit Margin:

This ratio measures the percentage of revenue translating into net income.

From 2019 to 2023, Nike consistently outperformed Adidas in terms of net profit margin, reflecting superior profitability. Nike’s net profit margin improved from 11.3% in 2019 to 13.5% in 2023, indicating the company’s strong ability to convert revenue into profit. In contrast, Adidas experienced fluctuations, with its net profit margin decreasing from 6.5% in 2019 to 2.3% in 2023, reflecting challenges in managing costs and generating profit. This comparison shows that Nike has been more efficient at converting its sales into profit compared to Adidas over the period.

Return of Equity (ROE)

This ratio measures how effectively the company generates profits from its equity.

Nike’s payable days are slightly higher than Adidas, which could indicate better relationships with suppliers or extended credit terms.

2.3 Efficiency Ratios

Inventory Turnover

: This ratio assesses how effectively Nike manages its inventory.

From 2019 to 2023, Nike generally displayed stronger efficiency ratios compared to Adidas, indicating more effective management of its assets. Nike’s inventory days remained relatively stable, with a slight improvement in 2023, signaling efficient inventory management and faster turnover. In contrast, Adidas saw an increase in inventory days over the period, reflecting slower inventory turnover. Additionally, Nike had better receivable days, showing a quicker collection of receivables compared to Adidas, whose receivable days increased, suggesting slower payments from customers. These efficiency ratios highlight Nike’s more effective asset utilization and operational efficiency compared to Adidas in managing inventory and receivables.

Receivable Days:

This ratio evaluates how quickly Nike collects payments from customers.

Nike’s lower receivable days indicate efficient credit management and strong cash flow practices. The company is able to collect payments from customers more quickly, ensuring timely cash inflows and improving liquidity.

2.4 Gearing Ratios

Debt-to-Equity Ratio:

This ratio measures Nike’s reliance on debt for financing operations.

Nike’s consistent debt-to-equity ratio reflects its balanced approach to financial leverage. By maintaining a steady ratio, the company manages debt effectively, minimizing financial risk while still using debt strategically to support growth. This disciplined approach ensures financial stability and flexibility for long-term success.

Interest Coverage Ratio:

This ratio evaluates Nike’s ability to cover interest expenses with operating income.

From 2019 to 2023, Nike’s Interest Coverage Ratio consistently outperformed Adidas, reflecting its stronger ability to meet interest obligations from operating income. Nike’s ratio improved from 12.5 in 2019 to 15.2 in 2023, indicating robust earnings before interest and taxes (EBIT) relative to its interest expenses. This suggests that Nike has a comfortable buffer to cover its interest payments. In contrast, Adidas's Interest Coverage Ratio fluctuated, decreasing from 8.0 in 2019 to 5.6 in 2023. This decline highlights that Adidas faced greater pressure in meeting interest expenses, signaling weaker financial stability and potentially higher risk compared to Nike.

3. Comparative Analysis

Nike outperforms Adidas in several key metrics:

Liquidity: Higher current and quick ratios indicate superior short-term financial health.
Profitability: Higher net profit margins and operating profit margins reflect better cost control and operational efficiency.
Efficiency: Lower receivable days and higher inventory turnover suggest effective management.
Gearing: Lower debt-to-equity ratios demonstrate prudent financial leverage.

Adidas shows a slight advantage in gross profit margin, likely due to premium pricing strategies. Payable days are close between the two companies, with Nike enjoying slightly better terms.

4. Integration with Macroeconomic and Industry Analysis

The global athletic apparel market is influenced by factors such as rising health consciousness, digitalization, and supply chain disruptions. Nike and Adidas face challenges from emerging competitors and sustainability pressures. Nike’s investments in innovation and digital transformation position it well to navigate these challenges and capitalize on growth opportunities.

5. Conclusion

Nike’s strong liquidity, profitability, and efficiency metrics, combined with its effective debt management, position the company as an attractive acquisition target. Over the years, Nike has demonstrated consistent financial performance, showcasing its ability to manage costs, generate cash flow, and maintain a healthy balance sheet. This financial stability, alongside its innovative approach to product development and marketing, provides a significant competitive edge over rivals like Adidas. While Adidas remains a formidable competitor in the global market, Nike’s established brand value, wide-reaching influence, and continued focus on innovation set it apart. Potential acquirers should not only recognize Nike’s current financial strengths but also its promising future growth prospects. With a strong foundation, an expansive global presence, and a commitment to innovation, Nike is well-positioned to continue its leadership in the market, making it an appealing investment opportunity for those looking to capitalize on future growth in the apparel and sports footwear sectors.

6. References

Nike, Inc. (2023). Annual Report 2023. [online] Available at: https://investors.nike.com/ [Accessed: 17 January 2025].
Adidas AG. (2023). Annual Report 2023. [online] Available at: https://www.adidas-group.com/ [Accessed: 17 January 2025].
Puma SE. (2023). Annual Report 2023. [online] Available at: https://www.puma.com/ [Accessed: 17 January 2025].
SEC Filings. (2023). Nike Form 10-K 2023. EDGAR. [online] Available at: https://www.sec.gov/ [Accessed: 17 January 2025].
McKinsey & Company. (2023). Global Trends in the Athletic Apparel Industry. [online] Available at: https://www.mckinsey.com/ [Accessed: 17 January 2025].
Bloomberg Terminal Reports. (2023). Nike vs. Adidas vs. Puma Financial Comparisons. Bloomberg Terminal. [Accessed: 17 January 2025].
Goel, S. (2016). Financial Ratios. New York: Business Expert Press.
Reid, W. & Myddelton, D.R. (2005). The Meaning of Company Accounts. 8th ed. Aldershot: Gower.

Appendices

Appendix A – Financial Statements

Nike Income Statements (2019–2023).

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Nike Balance Sheets (2019–2023).

Appendix B – Financial Ratios Calculations

Table B.1 Calculation of Current Ratio
Company	Year	Current Assets		Current Liabilities		Current Ratio
Nike	2019	$ 16,525	÷	$ 7,866	=	2.10
	2020	$ 20,556		$ 8,284		2.48
	2021	$ 26,291		$ 6,674		3.93
	2022	$ 28,213		$ 10,730		2.62
	2023	$ 25,202		$ 9,256		2.72
Adidas	2019	$ 9,809		$ 8,043		1.22
	2020	$ 11,482		$ 9,257		1.24
	2021	$ 13,944		$ 8,965		1.56
	2022	$ 12,154		$ 8,827		1.38
	2023	$ 10,644		$ 8,754		1.22
Note: In millions of USD

Table B.2 Calculation of Quick Ratio
Company	Year		Current Assets		Inventory		Prepaid Expenses			Current Liabilities		Quick Ratio
Nike	2019	(	$ 16,525	−	$ 5,622	−	$ 1,968	)	÷	$ 7,866	=	1.13
	2020		$ 20,556		$ 7,367		$ 1,653			$ 8,284		1.39
	2021		$ 26,291		$ 6,854		$ 1,498			$ 6,674		2.58
	2022		$ 28,213		$ 8,420		$ 2,129			$ 10,730		1.64
	2023		$ 25,202		$ 8,454		$ 1,942			$ 9,256		1.50
Adidas	2019		$ 9,809		$ 4,085		$ 3,889			$ 8,043		0.75
	2020		$ 11,482		$ 4,397		$ 3,930			$ 9,257		0.88
	2021		$ 13,944		$ 4,009		$ 5,722			$ 8,965		1.11
	2022		$ 12,154		$ 6,198		$ 3,581			$ 8,827		0.62
	2023		$ 10,644		$ 4,841		$ 3,425			$ 8,754		0.65
Note: In millions of USD

Table B.3 Calculation of Operating Cash Flow to Current Liabilities
Company	Year	Net Cash Flows from Operating Activities		Current Liabilities		Operating Cash Flow to Current Liabilities
Nike	2019	$ 5,903	÷	$ 7,886	=	0.74
	2020	$ 2,485		$ 8,284		0.29
	2021	$ 6,657		$ 6,674		0.99
	2022	$ 5,188		$ 10,730		0.48
	2023	$ 5,841		$ 9,256		0.63
Adidas	2019	$ 18,096		$ 8,043		0.33
	2020	$ 15,022		$ 9,257		(0.04)
	2021	$ 17,639		$ 8,965		0.29
	2022	$ 24,269		$ 8,827		(0.05)
	2023	$ 15,787		$ 8,754		0.30
Note: In millions of USD

Table B.4 Calculation of Gross Profit Margin
Company	Year	Gross Profit		Revenue		Gross Profit Margin
Nike	2019	$ 17,474	÷	$ 39,117	=	44.67%
	2020	$ 16,241		$ 37,403		43.42%
	2021	$ 19,962		$ 44,538		44.82%
	2022	$ 21,479		$ 46,710		45.98%
	2023	$ 22,292		$ 51,217		43.52%
Adidas	2019	$ 12,293		$ 23,640		52.0 %
	2020	$ 9,757		$ 19,844		49.2 %
	2021	$ 10,795		$ 21,234		50.9 %
	2022	$ 10,257		$ 22,511		45.6 %
	2023	$ 10,200		$ 21,427		47.6 %
Note: In millions of USD

Table B.5 Calculation of Operating Profit Margin
Company	Year	Operating Profit (Loss)		Revenue		Operating Profit Margin
Nike	2019	$ 4,772	÷	$ 39,117	=	12.19%
	2020	$ 3,115		$ 21,643		14.39%
	2021	$ 6,937		$ 24,578		28.22%
	2022	$ 6,675		$ 31,536		21.16%
	2023	$ 5,915		$ 53,823		10.98%
Adidas	2019	$ 2,660		$ 23,640		11.3%
	2020	$ 746		$ 19,844		4.0%
	2021	$ 1,986		$ 21,234		9.4%
	2022	$ 669		$ 22,511		3.0%
	2023	$ 268		$ 21,427		1.3%
Note: In millions of USD

Table B.6 Calculation of Net Profit Margin
Company	Year	Net Profit (Loss)		Revenue		Net Profit Margin
Nike	2019	$ 4,029	÷	$ 39,117	=	10.29%
	2020	$ 2,539		$ 21,643		11.73%
	2021	$ 5,727		$ 24,578		23.30%
	2022	$ 6,046		$ 31,536		19.17%
	2023	$ 5,070		$ 53,823		9.41%
Adidas	2019	$ 2,213		$ 23,640		9.4%
	2020	$ 493		$ 19,844		2.7%
	2021	$ 2,503		$ 21,234		9.9%
	2022	$ 645		$ 22,511		2.7%
	2023	$ -81		$ 21,427		-0.4%
Note: In millions of USD

Table B.7 Calculation of Return On Equity
Company	Year	Net Profit (Loss)		Equity		Return On Equity
Nike	2019	$ 4,029	÷	$ 9,040	=	44.56%
	2020	$ 2,539		$ 8,055		31.52%
	2021	$ 5,727		$ 12,767		44.85%
	2022	$ 6,046		$ 15,281		39.56%
	2023	$ 5,070		$ 14,004		36.20%
Adidas	2019	$ 2,213		$ 6,796		29.1%
	2020	$ 493		$ 6,454		6.7%
	2021	$ 2,503		$ 7,519		28.1%
	2022	$ 645		$ 4,991		12.3%
	2023	$ -81		$ 4,580		-1.6%
Note: In millions of USD

Table B.8 Calculation of Inventory Days
Company	Year		Inventory		Cost of Goods Sold				Inventory Days
Nike	2019	(	$ 5,622	÷	$ 21,643	)	× 365	=	95
	2020		$ 7,367		$ 21,162				127
	2021		$ 6,854		$ 24,576				102
	2022		$ 8,420		$ 25,231				122
	2023		$ 8,454		$ 28,925				107
Adidas	2019		$ 4,085		$ 11,347				131
	2020		$ 4,397		$ 10,087				159
	2021		$ 4,009		$ 10,439				140
	2022		$ 6,198		$ 12,254				185
	2023		$ 4,841		$ 11,227				157
Note: In millions of USD

Table B.9 Calculation of Receivable Days
Company	Year		Trade Receivables		Revenue				Receivable Days
Nike	2019	(	$ 4,272	÷	$ 39,117	)	× 365	=	40
	2020		$ 2,749		$ 37,403				27
	2021		$ 4,463		$ 44,538				36
	2022		$ 4,667		$ 46,710				36
	2023		$ 4,131		$ 51,217				29
Adidas	2017		$ 2,679		$ 23,366				42
	2018		$ 2,679		$ 19,844				49
	2019		$ 2,679		$ 21,234				46
	2020		$ 2,679		$ 22,511				43
	2021		$ 2,679		$ 23,366				38
Note: In millions of USD

Table B.10 Calculation of Payable Days
Company	Year		Trade Payables		Cost of Goods Sold				Payable Days
Nike	2019	(	$ 2,612	÷	$ 21,643	)	× 365	=	44
	2020		$ 2,248		$ 21,162				39
	2021		$ 2,836		$ 24,576				42
	2022		$ 3,358		$ 25,231				48
	2023		$ 2,862		$ 28,925				36
Adidas	2019		$ 2,908		$ 11,347				63
	2020		$ 2,908		$ 10,087				72
	2021		$ 2,908		$ 10,439				78
	2022		$ 2,908		$ 12,254				77
	2023		$ 2,276		$ 11,227				73
Note: In millions of USD

Table B.11 Calculation of Long-term Debt to Equity
Company	Year	Long-term debt		Equity		Debt to Equity
Nike	2019	$ 3,464	÷	$ 9,040	=	0.38
	2020	$ 9,406		$ 8,055		1.16
	2021	$ 9,413		$ 12,767		0.73
	2022	$ 8,920		$ 15,281		0.58
	2023	$ 8,927		$ 14,004		0.63
Adidas	2019	$ 1,786		$ 6,796		1.93
	2020	$ 2,835		$ 6,454		2.15
	2021	$ 2,918		$ 7,519		1.83
	2022	$ 3,104		$ 4,991		2.79
	2023	$ 2,630		$ 4,580		2.66
Note: In millions of USD

Table B.12 Calculation of Interest Coverage
Company	Year	EBIT		Interest Expense		Interest Coverage
Nike	2019	$ 4,801	÷	$ 49	=	97.98
	2020	$ 2,887		$ 89		32.43
	2021	$ 6,661		$ 262		25.42
	2022	$ 6,651		$ 205		32.44
	2023	$ 6,201		$ 6		1,033.5
Adidas	2019	$ 2,584		$ 161		16.0
	2020	$ 573		$ 159		3.6
	2021	$ 1,963		$ 116		16.9
	2022	$ 257		$ 158		1.6
	2023	$ 304		$ 174		1.7
Note: In millions of USD

Table B.13 Calculation of EBIT (Earnings Before Interest and Taxes)
Company	Year	Net Profit (Loss) (Before noncontrolling interests)		Interest expense		Tax		EBIT
Nike	2019	$ 4,029	+	$ 49	+	$ 32	=	$ 4,801
	2020	$ 2,539		$ 89		$ 58		$ 2,887
	2021	$ 5,727		$ 262		$ 110		$ 6,661
	2022	$ 6,046		$ 205		$ 292		$ 6,651
	2023	$ 5,727		$ 6		$ 699		$ 6,201
Adidas	2019	$ 2,148		$ 161		$ 490		$ 2,584
	2020	$ 490		$ 159		$ 0		$ 573
	2021	$ 1,765		$ 116		$ 0		$ 1,963
	2022	$ 268		$ 158		$ 124		$ 257
	2023	$ -64		$ 174		$ 34		$ 304
Note: In millions of USD

Table B.14 Calculation of Benchmark
Ratio	Year		Puma		Adidas				Benchmark
Current Ratio	2019	(	1.59	+	1.25	)	÷ 2	=	1.42
	2020		1.40		1.38				1.39
	2021		1.61		1.56				1.585
	2022		1.48		1.27				1.375
	2023		1.55		1.22				1.385
Quick Ratio	2019		1.59		0.75				1.17
	2020		1.40		0.88				1.14
	2021		1.61		1.11				1.36
	2022		1.27		0.62				0.945
	2023		1.22		0.65				0.935
Operating Cash Flow to Current Liabilities	2019		0.46		0.29				0.375
	2020		0.35		(0.07)				0.14
	2021		0.39		0.34				0.365
	2022		0.28		0.15				0.215
	2023		0.34		0.34				0.34

Table B.15 Calculation of Benchmark
Ratio	Year		Puma		Adidas				Benchmark
Gross Profit Margin	2019	(	47.2%	+	49.5%	)	÷ 2	=	48.35%
	2020		47.2%		49.5%				48.35%
	2021		47.2%		49.5%				48.35%
	2022		47.2%		49.5%				48.35%
	2023		47.3%		49.7%				48.50%
Operating Profit Margin	2019		7.59%		11.25%				9.42%
	2020		3.10%		3.78%				3.44%
	2021		7.42%		9.35%				8.39%
	2022		6.52%		2.97%				4.75%
	2023		5.56%		1.25%				3.41%
Net Profit Margin	2019		4.2%		7.9%				6.05%
	2020		-4.8%		2.7%				-1.05%
	2021		6.5%		9.9%				8.2%
	2022		4.2%		2.7%				3.45%
	2023		1.3%		-0.35%				0.475%
Return on Equity	2019		14.01%		28.47%				21.24%
	2020		7.15%		6.50%				6.83%
	2021		13.99%		27.33%				20.66%
	2022		14.30%		9.61%				11.96%
	2023		11.94%		-1.43%				5.26%

Table B.16 Calculation of Benchmark
Ratio	Year		Puma		Adidas				Benchmark
Inventory Days	2019	(	131	+	121	)	÷ 2	=	126
	2020		148		168				158
	2021		134		147				140.5
	2022		148		154				151
	2023		140		129				134.5
Receivable Days	2019		42		35.13				38.57
	2020		42		35.13				38.57
	2021		42		35.13				38.57
	2022		42		35.13				38.57
	2023		42		35.13				38.57
Payable Days	2019		100		80				90
	2020		177		101				109
	2021		109		82				95.5
	2022		116		80				98
	2023		109		73.77				91.39

Table B.17 Calculation of Benchmark
Ratio	Year		Puma		Adidas				Benchmark
Lon-term Debt to Equity	2019	(	0.39	+	1.93	)	÷ 2	=	1.16
	2020		0.39		2.15				1.27
	2021		0.39		1.83				1.11
	2022		0.39		2.79				1.59
	2023		0.39		2.66				1.53
Interest Coverage	2019		5.7x		16.7x				11.2x
	2020		5.7x		4.8x				5.25x
	2021		5.7x		57.3x				31.5x
	2022		5.7x		5.3x				5.5x
	2023		5.7x		5.3x				5.5x

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