Nike Inc. JUST DO IT. Presented: November 9, 2017 Chen CHEN | Chester CHU | Johnny XU | Rosy WANG

Content Section 1 | Introduction Section 2 | Industry Overview Section 3 | Macroeconomic Overview Section 4 | Company Business Overview Section 5 | Financial Analysis Section 6 | Valuation Section 7 | Recommendation

Introduction

1-Year Historical Price VS S&P 500 Index Introduction Company at a glance and relevant stock market performance comparison Profile Market Statistics Company Ticker NKE Year Founded 1964 Headquarter Beaverton, Oregon, USA Sector Consumer Goods Industry Textile - Apparel Footwear & Accessories Life Cycle Stage Mature Current Price $55.43 52 Week High $60.53 Market Cap $90.4B 52 Week Low $49.75 Trailing P/E 23.6 Fiscal Year Ends May 31, 2017 Forward P/E 20.8 ROA 12.92% PEG Ratio 2.8 ROE 32.63% EV/EBITDA 16.5 Payout Ratio 30.64% 1-Year Historical Price VS S&P 500 Index Q4 FY17 EARNINGS RELEASE Source: Yahoo Finance

Industry Overview

Industry Status | Present Day Footwear manufacturing is a mature industry with increasingly high level of competition Defining the Industry Global Footwear Manufacturing Industry Current Performance Companies in athletic footwear, apparel and accessories manufacturing and retailing industry produce and sell primarily athletic shoes, such as running shoes, basketball shoes sneakers, and apparel as well. Stores may also sell specialty sports footwear, such as golf shoes, bowling shoes and spiked shoes. ($ in billions) Global Footwear Manufacturing Industry at a Glance US Athletic Footwear Store Market Revenue Annual Growth Rate 2012-2017 Annual Growth Rate 2017-2022 $251bn 3.6% 4.7% Profit Wages Business $13.6bn $42.9bn 45,404 Products & Services Segmentation Major Players Adidas Li Ning ASICS Life Cycle Stage Mature Regulation Level None Revenue Volatility Low Technology Change Capital Intensity Barriers to Entry Medium Industry Assistance Industry Globalization Concentration Level Competition Level High Lululemon Puma Under Armour V.F. Source: IBISWorld, First Research

Industry | Future Outlook Industry Revenue grows slowly but stable driven by growing demand and new opportunities Industry Outlook Revenue Growth Rate Projection Growing Demand Purchase More Expensive and High-end Shoes: Customer continue to shift their focus to quality rather than price Per Capita Disposable Income: increases at an annualized rate of 2.9% Increasingly Participate in Sports Proliferation of the Athleisure Trend ($ in billions) Key Trends & Opportunities Opportunities and Limitations Revenue growth will slow Companies increasingly focus on expanding their inventory to include shoes for additional activities Business Trends Industry Opportunities Brand Name Licensing: Large endorsement deals with a few top athletes have given way to a wide range of small endorsement arrangements with athletes in many different sports Internet Sales: Website allows online shopping and especially important to small brands International Sales: Growth opportunity beyond mature US market, especially for athletic, men’s high-end dress shoes Profit and Performance Price-based competition from online retailers will limit gains Increase in wages as a share of revenue will eat into margins New entrants continue to enter the industry Companies will attempt to gain market share through mergers and acquisitions More Casual Styles: The greater informality of dress at work and the spread of "casual Fridays" have cut into the market for expensive dress shoes, creating intense price competition Using Consumer Data: To determine what types of products are most attractive and better cater to customers’ expectations Top Selling Categories: Running, basketball, kids, skate/surf, and walking shoes are the top-selling categories of athletic footwear in the US, whose demand driven by consumers aged 13 to 24 Brand Extension: Successful shoe brands easily lend themselves to the branding of clothes and other products Source for Graph: IBISWorld, First Research

Macroeconomics Overview

Key Macroeconomic Drivers There are four key macroeconomic drivers of the industry Per Capita Personal Disposable Income Participation in Sports ($ in thousands) Time Spent on Leisure and Sports x E-commerce sales ($ in billions) Source: IBISWorld

Company Business Overview

Company Overview NIKE—World's #1 footwear and apparel company Company Introduction Financial Snapshot Brands Incorporated in 1964 Principle business activity: design, development and world wide marketing and selling of athletic footwear, apparel, equipment, accessories and services. Largest seller of athletic footwear and apparel in the world. ($ in millions) 2013 2014 2015 2016 2017 LTM 2017 Net sales 25,313 27,799 30,601 32,376 34,350 34,359 Growth Rate 9.8% 10.1% 5.8% 6.1% Gross profit 11,034 12,446 14,067 14,971 15,312 15,151 Gross Margin 43.6% 44.8% 46.0% 46.2% 44.6% 44.1% EBITDA 3,740 4,266 4,824 5,164 5,465 5,350 EBITDA Margin 14.8% 15.3% 15.8% 16.0% 15.9% 15.6% Net income 2,472 2,693 3,273 3,760 4,240 3,941 Profit margin 9.7% 10.7% 11.6% 12.3% 11.5% Diluted EPS($) 1.35 1.49 1.85 2.16 2.51 2.34 Key Categories Major Product ($ in millions) Footwear: Designed primarily for specific athletic use Largely worn for casual of leisure purposes Running & Jordan lead in footwear sales Apparel: Feature same trademarks and distribution channel with footwear Men’s Training & Running lead in apparel sales With licensed college and professional team Equipment & Accessories: Including sports balls, bags, bats, etc. Source: NIKE 2017 10-K Source: IBISWorld, First Research

Revenue breakdown by Region US & International Market Market & Distribution NIKE has large market across world through different distribution channels Revenue breakdown by Region Distribution Channel ($ in millions) DTC(Direct to consumer): NIKE-owned retail stores, internet websites, and mobile applications Through a mix of independent distributors and licensees throughout the world. US & International Market US Market 46% revenue,6 distribution centers International Markets 54% revenue,60 distribution centers NIKE Brand factory stores NIKE Brand in-line stores Converse stores Hurley stores Total Source: NIKE 2017 10-K

Manufacture NIKE has large network of manufacturing Footwear Apparel 127 factories 15 countries Apparel 363 factories 37 countries China 27% Footwear 26% Apparel Vietnam 46% Footwear 16% Apparel Thailand 10% Apparel Other independent contract manufacture in Argentina, India, Brazil and Italy Indonesia 21% Footwear Steady supply of inputs Source: NIKE 2017 10-K

Management Team Experienced management team improve the operating performance of NIKE Mark G. Parker David J. Ayre Chairman, President and Chief Executive Officer Been employed by NIKE since 1979 with primary responsibilities in product research，design and development, marketing and brand management Executive Vice President, Global Human Resources Used to hold a number of senior human resource positions with PepsiCo since 1990. Chris L. Abston Trevor A. Edwards Vice President and Corporate Controller Vice President and Controller of Walmart International from February 2013 to January 2015 Spent 25 years in public accounting with Ernst & Young LLP President, NIKE Brand Joined NIKE in 1992 Been the director of marketing for America, Europe, Middle East and Africa Andrew Campion Hilary K. Krane Executive Vice President and Chief Financial Officer Joined NIKE in 2007 as Vice President of Global Planning and Development, leading strategic and financial planning. Leadership roles in strategic planning, mergers and acquisitions, financial planning and analysis, Operations and planning, investor relations and tax at The Walt Disney Company from 1996 to 2007. Executive Vice President, Chief Administrative Officer and General Counsel Joined Nike in April 2010 General Counsel and Senior Vice President for Corporate Affairs at Levi Strauss & Co. from 2006 to 2010 Partner and Assistant General Counsel at PricewaterhouseCoopers LLP from 1996-2006 Source: NIKE 2017 10-K

SWOT Analysis Strengthens Weaknesses Opportunities Threats Lawsuit Financial Performance Revenue & profitability growth Geographic Presence Diversified customer base Reduce country risk Operational Capabilities Supply chain Innovative technology & design Lawsuit Misleading price information Strengthens Weaknesses Increase in Counterfeit products Hamper brand image Foreign Exchange Risks Conduct business operations worldwide Foreign exchange hedging activities International Operations and Trade Risk Change of Customer’s preference Opportunities Threats Expanding Retail Market in the US Growth in private consumption, tourism Government favorable policies Initiatives Expansion, special in-store service Growing Footwear Market in the US

Economic Moat Analysis NIKE’s research, design and development efforts are key factors in its success. Largest seller of athletic footwear and apparel in the world Conduct business operation on a global basis Global growth through strength of brand Brand Recognition Large supply chain network Comprehensive distribution channel Economic scale Technical innovation in the design and manufacturing process Utilize research committees and advisory boards made up of athletes and experts in different areas Ability to respond in a timely and adequate manner to the change in customer’s preference Network Effects Product Innovation

Financial Analysis

Operating Efficiency Ratio Financial Analysis Stable cost, profitability, liquidity and operating efficiency Gross Margin Profitability Ratio ($ in millions) Liquidity Ratio Operating Efficiency Ratio

Financial Analysis DuPont Analysis Revenue Breakdown Each part of ROE performs well and proportion of footwear in revenue increases DuPont Analysis 2013 2014 2015 2016 2017 Tax Burden (NI / EBT) 75.9% 76.0% 77.8% 81.3% 86.8% Interest Burden (EBT / EBIT) 100.6% 96.3% 100.7% 102.7% 102.9% Operating Margin (EBIT / Revenue) 12.8% 13.2% 13.6% 13.9% 13.8% Asset Turnover (Revenue / Asset) 1.51 1.54 1.52 Equity Multiplier (Asset / Equity) 1.6 1.7 1.8 ROE 23.3% 24.6% 27.8% 30.1% 34.4% Revenue Breakdown Footwear Apparel NIKE Brand Equipment Converse Brand Global Division

Valuation Comparabe

Valuation | Comparable Companies Analysis NIKE’s implied share price is $ 56.37 V.F. Corporation Under Armour, Inc. Deckers Outdoor NIKE, Inc. · Apparel, Footwear & Accessories Companies with Brand North Face, Timberland, Lee and etc. · Market Cap 27.46 B · Gross Margin 49.4 % · EBITDA Margin 15.4 % · P/E Ratio 22.5 x · EV/EBITDA 15.6 x · Apparel, Shoes & Accessories Designed for Sports & Fitness · Market Cap 5.03 B · Gross Margin 45.5 % · EBITDA Margin 9.9 % · P/E Ratio 59.7 x · EV/EBITDA 17.8 x · Footwear Designer & Distributor Having Brand UGG · Market Cap 2.11 B · Gross Margin 47.1 % · EBITDA Margin 13.1 % · P/E Ratio 15.0 x · EV/EBITDA 8.2 x · Footwear, Apparel, Equipment, Accessories, and Services · Market Cap 90.91 B · Gross Margin 44.1 % · EBITDA Margin 15.6 % EV / EBITDA Financial Metric Implied Enterprise Value Equity Value Implied Share Price 16.9X~17.8x $5,350 $90,553~$95,370 $90,559~$95,376 $53.52~$56.37 Millions of the Currency Shares Outstanding : 1692 Millions

Valuation Discounted Cash Flow

Valuation | Discounted Cash Flow Analysis $62.61 from DCF and price range from $55.74 to $72.14 Unlevered Free Cash Flow Projection Enterprise Value Beta calculated from regression Size premium Discount Rate: 7.3% WACC Considering GDP growth rate and the industry situation, set the perpetuity as 3% Perpetuity Growth Rate 2.9% Low Debt Cost of equity Capital Structure Enterprise Value $ 98,322 mm Implied Share Price $62.61 (Current $55.76 as of Nov 8, 2017) $62.61 $72.14 $55.74 Perpetuity Growth rate

Recommendation

Add to Watch List Recommendation Current Price: $ 55.8 Price Range: $56.37-$62.61 $53.52-$72.14

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