Originally Posted by BreakPoint
I can GUARANTEE you that Nike does not make a profit of $50 per shoe. The retail mark-up is well over 2X the wholesale price. That's how retailers can put things on sale for 50% off and still make a profit.
Don't forget all the development, engineering, transportation, marketing, sales, advertising, and overhead costs that need to be included into the cost of a pair of shoes. The cost of materials for a shoe may be $7, but add in labor costs, equipment costs, factory overhead, and profit for the factory that Nike contracts to make the shoes. Add in all of these costs and I'd be surprised if Nike makes more than $15 in profit on a pair of shoes after accounting for returns, seconds, discounting after season, etc.
Besides, it's not like nobody would buy Nike shoes if Agassi didn't wear them. So you have to estimate only the INCREMENTAL sales that would not have occurred without Agassi. Was it an incremental $100 million in profits (not sales)? I doubt it.
Nike makes a hefty profit on shoe sales. It is their cash cow. When kids buy Jordan's, Kobe's, Ballistics etc.. I can safely say they earn more than $15/shoe. My brother works in the corporate office for a major athletic apparel company that includes shoes. The money the can make off shoe sales is why addidas can give Derrick rose $250 mil. And the cost of manufacturing a pair of nikes, factory+labor is no more than $20 best case scenario. When phil knight + Nike were busted for running sweat shops in Taiwan the cost of each shoes with labor attached was half. Basketball sneakers alone do $2 Bil in sales annually. I'm sure tennis doesn't do as well but even a slight fraction of that is a nice profit. And if u think shoe companies spend more than 5% of their budget on R&D then can I interest you in some moon rock I want to infuse into the next line of tennis racquets?