Why the cost of your next Nikes might go up

Why the cost of your next Nikes might go up
Nike CEO Mark Parker said in a conference call with Wall Street stock-pickers in June 2012, "The final lever we're pulling to improve gross margins is pricing."

PORTLAND, Ore. -- Think Nikes are expensive now? The price might be going up.

New research from Cowen and Co.'s Consumer Tracking Survey shows 37 percent of the population, and 46 percent of young men, strongly agree with the statement that Nike products are fairly priced. The percentage of people who think Nike products are overpriced is going down.

"(This) is not the type of question where we'd expect 80 percent of respondents to answer favorably — by definition fairness of pricing is something that many consumers complain about," said Cowen and Co. analyst Faye Landes, in a note to investors.

Nike has been slowly ratcheting up the cost of its products in order to increase its profitability since 2012.

"The final lever we're pulling to improve gross margins is pricing," CEO Mark Parker said in a conference call with Wall Street stock-pickers in June 2012. "The price-value relationship and brand strength go hand in hand. We'll continue to invest in the strength of the brand and maximize pricing opportunities as we've always done, but — and we're confident in our ability to move gross margins higher over time."

The cost increases haven't slowed sales.

Revenue increased 7 percent in the most recent three months to nearly $6.7 billion. Annual sales increased 8 percent to $25.3 billion.

Additional price increases will give a "boost to the top line" and continue to pump up profits, Landes said.

Nike increased prices across the board in 2011 in response to higher costs for labor, materials and shipping. Since then it's taken a more targeted approach.

"But I don't think you're going to see the kinds of broad pricing actions going forward that you saw from us (in 2011)," Chief Financial Officer Don Blair said in a December 2012 call with analysts.

Cowen and Co. has a $68 price target on Nike's stock (NYSE: NKE). It traded Tuesday morning for $63.79.

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