Nike 2015 Annual Report Download - page 29

PART II
Western Europe
(Dollars in millions) Fiscal 2015 Fiscal 2014 % Change
% Change
Excluding
Currency
Changes Fiscal 2013 % Change
%Change
Excluding
Currency
Changes
Revenues by:
Footwear $ 3,876 $ 3,299 17% 25% $ 2,657 24% 20%
Apparel 1,555 1,427 9% 14% 1,289 11% 7%
Equipment 278 253 10% 15% 247 2% -1%
TOTAL REVENUES $ 5,709 $ 4,979 15% 21% $ 4,193 19% 14%
Revenues by:
Sales to Wholesale Customers $ 4,455 $ 4,022 11% 17% $ 3,481 16% 11%
Sales Direct to Consumer 1,254 957 31% 40% 712 34% 29%
TOTAL REVENUES $ 5,709 $ 4,979 15% 21% $ 4,193 19% 14%
EARNINGS BEFORE INTEREST AND TAXES $ 1,277 $ 855 49% $ 643 33%
Fiscal 2015 Compared to Fiscal 2014
Excluding the changes in currency exchange rates, revenues for fiscal 2015
increased 21% and grew in every territory, led by AGS (Austria, Germany and
Switzerland) and the UK & Ireland, our largest territories in Western Europe,
which grew 27% and 20%, respectively. Revenues grew for every key
category, most notably Sportswear and Running. DTC revenues grew 40%,
driven by comparable store sales growth of 24%, strong online sales growth
and the addition of new stores.
The constant currency footwear revenue growth was driven by increases in
nearly every category, most notably Sportswear, Running and Football
(Soccer). For fiscal 2015, unit sales of footwear increased 20% and average
selling price per pair contributed approximately 5 percentage points of
footwear revenue growth. The increase in average selling price per pair was
driven equally by shifts in mix to higher-priced products and the favorable
impact of growth in our higher-priced DTC business.
The constant currency apparel revenue growth was attributable to increases
in nearly all key categories, led by Sportswear, Women’s Training and
Running, partially offset by a slight decline in Football (Soccer) primarily due to
the impact of World Cup in fiscal 2014. Unit sales of apparel in fiscal 2015
increased 14% while average selling price per unit was flat compared to the
prior year.
Despite the negative translation impact from changes in foreign currency
exchange rates, most notably the Euro, reported EBIT grew 49% for fiscal
2015 as a result of strong revenue growth, gross margin expansion and
selling and administrative expense leverage. Gross margin increased 190
basis points, primarily due to favorable standard foreign currency exchange
rates and higher average selling prices, which were only partially offset by
higher product costs. Selling and administrative expense decreased as a
percent of revenues despite increases in operating overhead, primarily as a
result of higher costs to support our growing DTC business. Demand creation
increased largely as a result of higher sports marketing and digital demand
creation costs.
Fiscal 2014 Compared to Fiscal 2013
On a currency-neutral basis, all territories in Western Europe reported revenue
growth for fiscal 2014, except Italy and Iberia, which declined 7% and 1%,
respectively. Revenues for the U.K. & Ireland and AGS increased 20% and
23%, respectively. On a category basis, revenue growth in fiscal 2014 was
fueled by our Running, Football (Soccer) and Sportswear categories. The
growth in DTC revenues for fiscal 2014 was driven by 17% growth in
comparable store sales, rapid growth in online sales and the addition of 19 net
new stores.
Constant currency footwear revenue growth in Western Europe reflected
increases in every key category, most notably our Sportswear, Running,
Football (Soccer) and Basketball categories. Unit sales in fiscal 2014
increased 11% and average selling price per pair contributed approximately 9
percentage points of footwear revenue growth. The increase in average price
per pair was primarily the result of price increases, shifts in mix to higher-
priced products and lower discounts.
The constant currency increase in Western Europe apparel revenue was due
to increases in Football (Soccer), Running and Women’s Training, partially
offset by a decline in Sportswear. Unit sales increased 3% while average
selling price per unit contributed approximately 4 percentage points of apparel
revenue growth, driven primarily by lower discounts on off-price closeout
sales compared to the prior year.
On a reported basis, EBIT for fiscal 2014 grew at a faster rate than revenues
as a result of a 150 basis point increase in gross margin and selling and
administrative expense leverage. The gross margin increase was fueled by
higher average selling prices, growth in our higher-margin DTC business,
lower discounts and lower off-price mix, which more than offset unfavorable
standard foreign currency exchange rates and higher product input costs.
Selling and administrative expense was lower as a percent of revenue despite
higher operating overhead costs to support growth in our DTC business and
higher demand creation spending for sports marketing and support for key
events, such as the World Cup.
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