Nike 2006 Annual Report Download - page 4

Our wholly-owned subsidiary Hurley International LLC (“Hurley”), headquartered in Costa Mesa,
California, designs and distributes a line of action sports apparel for surfing, skateboarding, and snowboarding,
and youth lifestyle apparel, and accessories under the Hurley®trademark.
Our wholly-owned subsidiary, NIKE Bauer Hockey Inc. (“NIKE Bauer Hockey”), headquartered in
Greenland, New Hampshire, manufactures and distributes ice skates, skate blades, protective gear, hockey sticks,
licensed apparel and accessories under the NIKE Bauer®, Bauer®, and NIKE®trademarks. NIKE Bauer™also
offers a full selection of products for street and roller hockey.
Our wholly-owned subsidiary, Exeter Brands Group LLC (“Exeter Brands Group”), headquartered in New
York City, New York, sells athletic footwear and apparel in retail channels for value-conscious consumers, and
markets and licenses athletic footwear and apparel under the Starter logo®and Shaq®brand names.
Sales and Marketing
Financial information about geographic and segment operations appears in Note 17 of the consolidated
financial statements on page 68.
We experience moderate fluctuations in aggregate sales volume during the year. Historically, revenues in
the first and fourth fiscal quarters have slightly exceeded those in the second and third quarters. However, the
mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic
demand for particular types of footwear, apparel and equipment.
Because NIKE is a consumer products company, the relative popularity of various sports and fitness
activities and changing design trends affect the demand for our products. We must therefore respond to trends
and shifts in consumer preferences by adjusting the mix of existing product offerings, developing new products,
styles and categories, and influencing sports and fitness preferences through aggressive marketing. This is a
continuing risk. Failure to respond in a timely and adequate manner could have a material adverse effect on our
sales and profitability.
United States Market
In fiscal 2006, sales in the United States (including U.S. sales of Cole Haan, Converse, Exeter Brands
Group, Hurley, NIKE Bauer Hockey and NIKE Golf) accounted for approximately 47 percent of total revenues,
compared to 46 percent in fiscal 2005 and 47 percent in fiscal 2004. We sell to approximately 24,000 retail
accounts in the United States. The NIKE brand domestic retail account base includes a mix of footwear stores,
sporting goods stores, athletic specialty stores, department stores, skate, tennis and golf shops, and other retail
accounts. During fiscal year 2006, our three largest customers accounted for approximately 30 percent of NIKE
brand sales in the United States excluding sales from NIKE Bauer Hockey and NIKE Golf, and 25 percent of
total sales in the United States.
We make substantial use of our “futures” ordering program, which allows retailers to order five to six
months in advance of delivery with the commitment that 90 percent of their orders will be delivered within a set
time period at a fixed price. In fiscal year 2006, 90 percent of our U.S. wholesale footwear shipments (excluding
Cole Haan, Converse, Exeter Brands Group, Hurley, NIKE Bauer Hockey and NIKE Golf) were made under the
futures program, compared to 91 percent in fiscal 2005 and 90 percent in fiscal 2004. In fiscal 2006, 69 percent
of our U.S. wholesale apparel shipments (excluding U.S. licensed team apparel, Cole Haan, Converse, Exeter
Brands Group, Hurley, NIKE Bauer Hockey and NIKE Golf) were made under the futures program, compared to
71 percent in fiscal 2005, and 67 percent in fiscal 2004.
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