Nike 2006 Annual Report Download - page 12

apparel, and equipment markets; intense competition among designers, marketers, distributors and sellers of
athletic footwear, apparel, and equipment for consumers and endorsers; demographic changes; changes in
consumer preferences; popularity of particular designs, categories of products, and sports; seasonal and
geographic demand for NIKE products; difficulties in anticipating or forecasting changes in consumer
preferences, consumer demand for NIKE products, and the various market factors described above; difficulties in
implementing, operating, and maintaining NIKE’s increasingly complex information systems and controls,
including, without limitation, the systems related to demand and supply planning, and inventory control;
interruptions in data and communications systems; fluctuations and difficulty in forecasting operating results,
including, without limitation, the fact that advance “futures” orders may not be indicative of future revenues due
to the changing mix of futures and at-once orders, currency exchange rate fluctuations, order cancellations, and
the fact that a significant portion of our revenue is not derived from futures orders; the ability of NIKE to sustain,
manage or forecast its growth and inventories; the size, timing and mix of purchases of NIKE’s products; new
product development and introduction; the ability to secure and protect trademarks, patents, and other intellectual
property; performance and reliability of products; customer service; adverse publicity; the loss of significant
customers or suppliers; dependence on distributors; business disruptions; increased costs of freight and
transportation to meet delivery deadlines; increases in borrowing costs due to any decline in our debt ratings;
changes in business strategy or development plans; general risks associated with doing business outside the
United States, including without limitation, import duties, tariffs, quotas, political and economic instability, and
terrorism; changes in government regulations; liability and other claims asserted against NIKE; the ability to
attract and retain qualified personnel; and other factors referenced or incorporated by reference in this report and
other reports.
The risks included here are not exhaustive. Other sections of this report may include additional factors
which could adversely affect NIKE’s business and financial performance. Moreover, NIKE operates in a very
competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, nor can it assess the impact of all such risk factors on NIKE’s
business or the extent to which any factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not
place undue reliance on forward-looking statements as a prediction of actual results.
Our products face intense competition.
NIKE is a consumer products company and the relative popularity of various sports and fitness activities
and changing design trends affect the demand for our products. The athletic footwear, apparel and equipment
industry is keenly competitive in the United States and on a worldwide basis. We compete internationally with an
increasing number of athletic and leisure shoe companies, athletic and leisure apparel companies, sports
equipment companies, and large companies having diversified lines of athletic and leisure shoes, apparel and
equipment. We also compete with other companies for the production capacity of independent manufacturers that
produce our products and for import quota capacity.
Our competitors’ product offerings, technologies, marketing expenditures (including for advertising and
endorsements), pricing, costs of production, and customer service are areas of intense competition. This, plus
rapid changes in technology and consumer preferences in the markets for athletic and leisure footwear and
apparel, and athletic equipment, constitute significant risk factors in our operations. If we do not adequately and
timely anticipate and respond to our competitors, our costs may increase or the consumer demand for our
products may decline significantly.
If we are unable to anticipate consumer preferences and develop new products, we may not be able to
maintain or increase our net revenues and profitability.
Our success depends on our ability to identify, originate and define product trends as well as to anticipate,
gauge and react to changing consumer demands in a timely manner. All of our products are subject to changing
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