Nike (NKE) Runs Out Of Running Room

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Nike (NKE) is buying soccer shoe company Umbro for $583 million. That may seen like a modest deal for the world’s largest athletic apparel company, but it will have to make a lot more.

Nike already sells shoes for running, golfing, boating, basketball, football, and just plain walking. It sells shirts, pants, and coats. It also markets everything from sunglasses to watches to gold balls. In other words, there are very few worlds left to conquer and that can be bad for revenue.

According to The Wall Street Journal "Beaverton, Ore.-based Nike sees soccer as an important growth category in its competition with European titans Adidas and Puma. It is better for Nike to buy into a market and revenue stream than try to enter the market on its own. That will almost certainly be the case in the future, since the Nike brand is reaching a point of saturation in many markets.

Nike can hire a few MBAs and start an M&A operation. It will need one to keep up its growth rate.

Douglas A. McIntyre