Unlike Nike's other shoes, there is no cutting out pieces and assembling them. The upper is made in one piece and then fastened to the sole. That makes production quicker with less labor and larger profit margins, Parker said. The process also fits into Nike's sustainability push because the amount of material wasted weighs as much as a sheet of paper.
“If you think about shoemaking, it largely hasn't changed for decades, arguably centuries, because it's cut material that is sewn together,” Parker said. “There is no more cutting and stitching with this. The most labor-intensive part of the footwear manufacturing process is gone from the picture.”
The manual work needed to attach pieces is the main reason sneakers are made in Asia's cheaper labor markets, according to Matt Powell, an analyst for SportsOneSource. Without that step, Nike could reduce production time by making shoes in the U.S. and other major markets. Nike makes 96 percent of its shoes in Vietnam, China and Indonesia, according to a public filing.
“One of the critical issues our industry hasn't figured out is how to get products to market more quickly,” said Powell, who is based in Scarborough, Maine. “The biggest time in the life cycle of getting a shoe to the U.S. is the time it spends on a boat coming from Asia. If you could eliminate that, that's a huge chunk out of the time line.”
The flexibility created by cheaper, more automated shoemaking could eventually lead to a day when a person can visit a Nike store and have their foot scanned. The customer would be able to design the shoe by color and style down to a single thread. The software would then use the information to make personalized shoes.
“The potential for this is almost infinite,” said Denson, who started as a Nike store manager in 1979.
The impact of shoe weaving on Nike's bottom line will depend on whether it meets consumers' demands for performance and style, according to Sam Poser, an analyst for Sterne Agee & Leach Inc. in New York. Flyknit is also just one shoe at a company with about $23 billion in annual sales, he said.
Eoin Treacy's view Nike is the epitome of what we describe as an Autonomy. It is truly globally oriented, offers access to the growth of the global middle class through the affordability and desirability of its products, dominates its respective niche and has a solid record of dividend increases. (Also see Comment of the Day on November 24th 2011).
The share has become quite overextended following an impressive advance over the last few months. The risk of a reversion towards the mean has increased but a sustained move below $95 would be required to begin to question medium-term upside potential.