Fleet-of-footwear NIKE, named for the Greek goddess of victory, is the world's #1 shoe and apparel company. NIKE designs, develops, and sells a variety of products and services to help in playing basketball and soccer (football), as well as in running, men's and women's training, and other action sports. Under its namesake brand, NIKE also markets sports-inspired products for children and various competitive and recreational activities, such as golf, tennis, and walking, and sportswear by Converse and Hurley. NIKE sells through more than 1,000-owned retail stores worldwide, an e-commerce site, and to thousands of retail accounts, independent distributors, and licensees.
NIKE operates in six geographic segments: North America, Western Europe, Central & Eastern Europe, Greater China, Japan, and Emerging Markets. Almost all of the company's branded footwear and apparel is made by third-party manufacturers outside of the US, mainly in Vietnam, China, and Indonesia. Its equipment products are made both in the US and abroad.
Each NIKE Brand geographic segment operates predominantly in one industry namely, the design, development, marketing and selling of athletic footwear, apparel and equipment. The segments include results for the NIKE, Jordan and Hurley brands. The Company's NIKE Brand DTC operations are managed within each geographic operating segment. Converse is also a reportable segment and operates in one industry: the design, marketing, licensing and selling of casual sneakers, apparel, and accessories.
Converse and Hurley, its affiliate brands, and NIKE Golf comprise NIKE's Other Businesses. NIKE sells to thousands of US retail accounts, which include a mix of footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis, and golf shops; and other retail accounts. During 2016, NIKE's three largest customers accounted for more than 25% of US sales.
NIKE sells its products to retail accounts through its own Direct-to-Consumer operations and through a mix of independent distributors, licensees, and sales representatives worldwide. The company sells to thousands of retail accounts and operates more than 40 distribution centers outside of the US.
Footwear accounted for 61% of the company's revenues in 2016.
NIKE is based near Beaverton, Oregon; it has a 400-acre site with more than 40 buildings. In fiscal 2016 (May year end) North America accounted for 46% of sales, Western Europe (18%), Greater China (12%), Emerging Markets (11%), Central & Eastern Europe (4%), and Japan (3%). Other operations account for the rest of its revenues.
In the US NIKE owns a full product line distribution center in Memphis, Tennessee, and four other distribution centers, three of which are leased, also in Memphis. NIKE Brand apparel and equipment are also shipped from its Foothill Ranch, California distribution center, which the company leases. The company also owns or leases distribution and customer service facilities outside the United States. The most significant are the distribution facilities located in Laakdal, Belgium; Taicang, China; Tomisato, Japan and Incheon, Korea, all of which the company owns.
The company has branch offices and subsidiaries in Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, China, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Mexico, New Zealand, the Netherlands, Norway, Panama, the Philippines, Poland, Portugal, Russia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand, Turkey, the UAE, the UK, the US, Uruguay and Vietnam.
Sales and Marketing
Worldwide, NIKE sells its products to retail accounts, through NIKE-owned retail stores and Internet websites, and through a mix of independent distributors and licensees. NIKE also sells its products to wholesale customers and directly to consumers through its Direct to Consumer operations. It also enters into licensing agreements that permit unaffiliated parties to make and sell certain apparel, digital devices and applications, and other equipment designed for sports activities.
The company sells to thousands of retail accounts and ships products from more than 40 distribution centers outside of the US.
NIKE markets its footwear and other products globally through diverse advertising and promotional programs and campaigns, including print, social media, online advertising, and endorsement contracts with celebrity athletes. Total advertising and promotion expenses were about $3.3 million, $3.2 million and $3.0 million for 2016, 2015, and 2014, respectively.
During fiscal 2014, NIKE's three largest customers helped to bring in 25% of US sales. During the same reporting period, the company's three largest customers outside of the US accounted for 13%, of total non-US sales.
The company is supplied by approximately 142 footwear factories located in 15 countries and is supplied by approximately 394 apparel factories located in 39 countries.
Net sales of the company have seen an upward trend since 2012.
In fiscal 2016 net sales increased by 6% due to higher North America and Greater China revenues partially offset by decreased sales from Emerging Markets.
Excluding changes in foreign currency exchange rates, North America revenues increased primarily due to growth in its Sportswear, Jordan Brand and Running categories. Direct-To-Consumer revenues grew fueled by strong online sales growth, the addition of new stores. and comparable store sales growth.
Currency-neutral footwear revenue growth was attributable to higher revenues in most key categories, led by the Jordan Brand, Sportswear, Running and Women's Training. Apparel revenue growth was driven by its Sportswear and Men's Training categories.
Net income has also moved upward since 2012.
In fiscal 2016, net income increased by 15% due to higher sales.
Net cash provided by the operating activities decreased by $1.5 billion due to changes in accounts payable, accrued liabilities, and income tax payable.
Sagging sales pushed NIKE's directors into kicking off an organizational restructure in 2017. The firm will cut 2% of its workforce, consolidate its six segments into four, and sharpen its focus on 12 key global cities, including New York, London, Beijing, and Shanghai. NIKE expects the majority of its growth into 2020 to come from these global trend-setting cities. The company will also reduce the number of trainer lines by a quarter.
In addition to brand strength, NIKE has fueled momentum by launching a stream of new products, including the NIKE Fuelband, a digital device to track daily activity, and the Flyknit, a technology designed to lighten footwear weight and improve fit. In anticipation of replacing rival Reebok as the maker of NFL-branded apparel and uniforms, NIKE also expanded its offerings with new high-performance uniforms for all 32 NFL teams.
The company continues to diversify one of its apparel technologies, Dri-FIT, which is the adaptive foundation of everything from shirts to socks. Key Dri-FIT performance products introduced in 2015 included Running Dri-FIT Knit and the NIKE Pro Bra Collection.
NIKE invests in new technologies that increase automation, helps reduce waste and have long-term potential to increase both customization of its products and speed to market. Automation is also driving growth in its higher gross margin Direct-To-Consumer business, led by NIKE.com, as part of an integrated marketplace growth strategy across its DTC and wholesale operations.
Facing a slump in its golf division sales, in 2016 the company announced that it would shift away from equipment (golf clubs, balls, and bags) and instead focus on expanding its golf footwear and apparel business.