Nike, Inc.: Cost of Capital

NIKE, INC.: COST OF CAPITAL

At the meeting, management revealed plans to address both top-line growth and operating performance. To boost revenue, the company would develop more athletic-shoe products in the midpriced segment3—a segment that Nike had overlooked in recent years. Nike also planned to push its apparel line, which, under the recent leadership of industry veteran Mindy Grossman,4 had performed extremely well. On the cost side, Nike would exert more effort

Nike’s fiscal year ended in May. Douglas Robson, “Just Do … Something: Nike’s Insularity and Foot-Dragging Have It Running in Place,” BusinessWeek (2 July 2001). 3 Sneakers in this segment sold for $70–$90 a pair. 4 Mindy Grossman joined Nike in September 2000. She was the former president and chief executive of Jones Apparel Group’s Polo Jeans division.

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This case was prepared from publicly available information by Jessica Chan, under the supervision of Robert F. Bruner and with the assistance of Sean D. Carr. The financial support of the Batten Institute is gratefully acknowledged. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright © 2001 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardenpublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Rev. 10/05.

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Only a week earlier, on June 28, 2001, Nike had held an analysts’ meeting to disclose its fiscal-year 2001 results.1 The meeting, however, had another purpose: Nike management wanted to communicate a strategy...