Today, it is hard to think of a logo that is more globally recognisable than the infamous “Nike Swoosh” – not a bad accolade for a logo that was created by a university graphic design student for the grand commission of $35! Great brands are synonymous with great products – it is very difficult to scale a brand (no matter how ingenious the marketing campaign may be) if the underlying product is sub-par. Phil Knight, founder of Nike, summed this concept up well when he was asked whether Nike was a marketing or technology company. He responded with “Nike is a marketing-oriented company, and the product is our most important marketing tool”.

To clarify, that does not mean that great, well-established brands will automatically continue to produce excellent products. In that regard, distinguishing between those brands that maintain a culture of innovation and those that are happy to rest on their laurels (and their former accomplishments) is an exercise our Global Blue Chip team devote significant effort to.

Nike is a prime example of a company which has a deep, embedded, history of innovation. When it comes to product development, Nike starts with their athlete partners; asking what they can do to help these world-class competitors overcome their current obstacles and enabling them to achieve their ultimate goals.

It is this focus on creating products that make you better at your chosen sport that separates Nike, from a purely fashion orientated company, to one which is technology lead.

Fashion is fickle, and trends are often short-lived. Instead, Nike becomes a partner for its customers – its incremental product improvements provide us with the tools to push beyond the boundaries set by our previous preconceptions.

Whether it’s a sub two hour marathon (attempt) or something as (un)remarkable as convincing me to go out and do some cardio, Nike products are helping us redefine what we previously thought to be possible.

These accomplishments are tangible and help Nike build a far deeper relationship with its customers than its predominately fashion focused peers. There is little doubt that this has been a driving factor behind its phenomenal performance - Nike has returned a staggering 78,550% to investors, in sterling, since its IPO in 1980 to 31st May 2018. This compares to the MSCI World, which has returned approximately 2,260% over the same period. This unwavering focus on innovation has enabled the company to transition from a one-man-band selling imported Japanese trainers out of the boot of a car to the behemoth that it is today.

Pleasingly, from an investment perspective, it is clearly evident that this philosophy remains a key priority at Nike. In March 2017, Mark Parker unveiled Nike’s new business strategy, the Consumer Direct Offensive – affectionately dubbed the “triple double”; concentrating on delivering 2X Innovation, 2X Speed and 2X Direct. In English, Nike is aiming to double product innovations; double the speed these new products reach customers and double the number of sales that are made directly to the consumer (as opposed to via its legacy wholesale distribution channel).

Despite the catchy title, it is our job as investment managers for Ravenscroft to remain professionally sceptical when appraising a company’s business strategy and, for that reason, we are firm believers that actions generally speak louder than words.

Whilst it is still early days, so far, Nike appears to be delivering on its promises.

During Q1 2018, Nike launched two new innovation platforms; the Air VaporMax and Nike React. The first shoe from the Nike React platform (the Epic React) set new sales records for a performance innovation launch with the company selling through several weeks’ worth of supply in just four days. Not only is Nike focusing on creating new platforms but it also continues to leverage its existing technologies (for example FlyKnit) by incorporating these innovations into a broader range of its shoes. The combination of both new platforms and the expansion of existing technologies results in a greater level of innovation for the end customer and it’s pleasing to see this transition into greater revenues for the company.

When it comes to 2X Speed, Nike is focusing on its “express lane” initiative. This aims to reduce delivery times by using real time sales data (from the company’s direct to consumer channels) to allocate manufacturing resources to its most in-demand models/styles.

Its 2X Direct strategy is also progressing well with the latest revenue figures showing a growth rate of 18% year-over-year for Nike’s digital business. With the former in mind, in April, Nike acquired Invertex Ltd, which is intended to, in the words of Nike’s chief digital officer, Adam Sussman

“deepen the company’s bench of digital talent and further Nike’s capabilities in computer vision and artificial intelligence as they create the most compelling Nike consumer experience at every touch point”.

As investors looking towards the longer term, the clear focus Nike displays towards the experience its consumers associate with its brand is music to our ears. This in itself is a further example of innovation which enables Nike to stay relevant in a world where conventional retailers are at threat from disruptors.

We hope the above comments go some way to demonstrating our belief that Nike is far more than a fashion company with a killer strap line.

When it comes to investing for the future Nike is not JUST DOing IT, it’s doing it well.