Nike 2015 Annual Report Download - page 14

PART I
deliver products to our customers in the Sojitz Markets. Such a disruption
could result in canceled orders that would adversely affect sales and
profitability.
Our success depends on our global distribution facilities.
We distribute our products to customers directly from the factory and through
distribution centers located throughout the world. Our ability to meet
customer expectations, manage inventory, complete sales and achieve
objectives for operating efficiencies and growth, particularly in emerging
markets, depends on the proper operation of our distribution facilities, the
development or expansion of additional distribution capabilities and the timely
performance of services by third parties (including those involved in shipping
product to and from our distribution facilities). Our distribution facilities could
be interrupted by information technology problems and disasters such as
earthquakes or fires. Any significant failure in our distribution facilities could
result in an adverse effect on our business. We maintain business interruption
insurance, but it may not adequately protect us from adverse effects that
could be caused by significant disruptions in our distribution facilities.
We rely significantly on information technology to operate
our business, including our supply chain and retail
operations, and any failure, inadequacy or interruption of
that technology could harm our ability to effectively
operate our business.
We are heavily dependent on information technology systems and networks,
including the Internet and third-party hosted services (“information technology
systems”), across our supply chain, including product design, production,
forecasting, ordering, manufacturing, transportation, sales and distribution, as
well as for processing financial information for external and internal reporting
purposes, retail operations and other business activities. Our ability to
effectively manage and maintain our inventory and to ship products to
customers on a timely basis depends significantly on the reliability of these
information technology systems. Over a number of years, we have
implemented information technology systems in all of the geographical
regions in which we operate. Our work to integrate and enhance these
systems and related processes in our global operations is ongoing. The failure
of these systems to operate effectively, including as a result of security
breaches, viruses, hackers or other causes, or problems with transitioning to
upgraded or replacement systems could cause delays in product fulfillment
and reduced efficiency of our operations, could require significant capital
investments to remediate the problem, and may have an adverse effect on
our reputation, results of operations and financial condition.
We also use information technology systems to process financial information
and results of operations for internal reporting purposes and to comply with
regulatory financial reporting, legal and tax requirements. If our information
technology systems suffer severe damage, disruption or shutdown and our
business continuity plans do not effectively resolve the issues in a timely
manner, we could experience delays in reporting our financial results, which
could result in lost revenues and profits, as well as reputational damage.
Furthermore, we depend on information technology systems and personal
data collection and use for digital marketing, digital commerce and the
marketing and use of our NIKE+ products and services. We also engage in
electronic communications throughout the world between and among our
employees as well as with other third parties, including customers, suppliers,
vendors and consumers. Our information technology systems are critical to
many of our operating activities and our business processes and may be
negatively impacted by any service interruption or shutdown.
The market for prime real estate is competitive.
Our ability to effectively obtain real estate to open new retail stores and
otherwise conduct our operations, both domestically and internationally,
depends on the availability of real estate that meets our criteria for traffic,
square footage, co-tenancies, lease economics, demographics and other
factors. We also must be able to effectively renew our existing real estate
leases. In addition, from time to time, we seek to downsize, consolidate,
reposition or close some of our real estate locations, which may require
modification of an existing lease. Failure to secure adequate new locations or
successfully modify leases for existing locations, or failure to effectively
manage the profitability of our existing fleet of retail stores, could have an
adverse effect on our operating results and financial condition.
Additionally, the economic environment may at times make it difficult to
determine the fair market rent of real estate properties domestically and
internationally. This could impact the quality of our decisions to exercise lease
options at previously negotiated rents and to renew expiring leases at
negotiated rents. Any adverse effect on the quality of these decisions could
impact our ability to retain real estate locations adequate to meet our targets
or efficiently manage the profitability of our existing fleet of stores, which could
have an adverse effect on our operating results and financial condition.
Extreme weather conditions and natural disasters could
negatively impact our operating results and financial
condition.
Extreme weather conditions in the areas in which our retail stores, suppliers,
customers, distribution centers and vendors are located could adversely
affect our operating results and financial condition. Moreover, natural
disasters such as earthquakes, hurricanes and tsunamis, whether occurring
in the United States or abroad, and their related consequences and effects,
including energy shortages and public health issues, could disrupt our
operations, the operations of our vendors and other suppliers or result in
economic instability that may negatively impact our operating results and
financial condition.
Our financial results may be adversely affected if
substantial investments in businesses and operations fail
to produce expected returns.
From time to time, we may invest in technology, business infrastructure, new
businesses, product offering and manufacturing innovation and expansion of
existing businesses, such as our retail operations, which require substantial
cash investments and management attention. We believe cost-effective
investments are essential to business growth and profitability. However,
significant investments are subject to typical risks and uncertainties inherent in
developing a new business or expanding an existing business. The failure of
any significant investment to provide expected returns or profitability could
have a material adverse effect on our financial results and divert management
attention from more profitable business operations.
We are subject to periodic litigation and other regulatory
proceedings, which could result in unexpected expense of
time and resources.
From time to time we are called upon to defend ourselves against lawsuits
and regulatory actions relating to our business. Due to the inherent
uncertainties of litigation and regulatory proceedings, we cannot accurately
predict the ultimate outcome of any such proceedings. An unfavorable
outcome could have an adverse impact on our business, financial condition
and results of operations. In addition, any significant litigation in the future,
regardless of its merits, could divert management’s attention from our
operations and result in substantial legal fees.
We depend on key personnel, the loss of whom would
harm our business.
Our future success will depend in part on the continued service of key
executive officers and personnel. The loss of the services of any key individual
could harm our business. Our future success also depends on our ability to
recruit, retain and engage our personnel sufficiently, both to maintain our
current business and to execute our strategic initiatives. Competition for
employees in our industry is intense and we may not be successful in
attracting and retaining such personnel.
NIKE, INC. 2015 Annual Report and Notice of Annual Meeting 75
FORM 10-K