Nike 2015 Annual Report Download - page 5

PART I
Sales and Marketing
Financial information about geographic and segment operations appears in
Note 18 — Operating Segments and Related Information of the
accompanying Notes to the Consolidated Financial Statements.
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 as a result of changes in seasonal and
geographic demand for particular types of footwear, apparel and equipment,
as well as other macroeconomic, operating and logistics-related factors.
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 extensive marketing. Failure to respond in a timely
and adequate manner could have a material adverse effect on our sales and
profitability. This is a continuing risk. We report our NIKE Brand operations
based on our internal geographic organization. Each NIKE Brand geography
operates predominantly in one industry: the design, development, marketing
and selling of athletic footwear, apparel, equipment, accessories and
services. Our reportable operating segments for the NIKE Brand are: North
America, Western Europe, Central & Eastern Europe, Greater China, Japan
and Emerging Markets. Our NIKE Brand Direct to Consumer 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.
United States Market
For both fiscal 2015 and fiscal 2014, NIKE Brand and Converse sales in the
United States accounted for approximately 46% of total revenues, compared
to 45% for fiscal 2013. We sell our NIKE Brand, Jordan Brand, Hurley and
Converse products to thousands of retail accounts in the United States,
including a mix of footwear stores, sporting goods stores, athletic specialty
stores, department stores, skate, tennis and golf shops and other retail
accounts. In the United States, we utilize NIKE sales offices to solicit sales as
well as independent sales representatives to sell specialty products for golf
and skateboarding. During fiscal 2015, our three largest customers
accounted for approximately 26% of 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 their orders will be delivered within a set time period at a fixed price. In
fiscal 2015, 87% of our U.S. wholesale footwear shipments (excluding NIKE
Golf, Hurley and Converse) were made under the futures program, compared
to 86% in fiscal 2014 and 87% in fiscal 2013. In fiscal 2015, 67% of our U.S.
wholesale apparel shipments (excluding NIKE Golf, Hurley and Converse)
were made under the futures program, compared to 71% in fiscal 2014 and
67% in fiscal 2013.
Our Direct to Consumer operations sell NIKE Brand products, including
Jordan Brand and Hurley, to consumers through our e-commerce website,
www.nike.com. We also sell Converse products to consumers through a
Converse owned e-commerce website, www.converse.com.Inaddition,our
Direct to Consumer operations sell through the following number of retail
stores in the United States:
U.S. Retail Stores Number
NIKE Brand factory stores 185
NIKE Brand in-line stores, including employee-only stores 33
Converse stores (including factory stores) 92
Hurley stores (including factory and employee stores) 29
TOTAL 339
NIKE owns a full product line distribution center located in Memphis,
Tennessee. In addition, NIKE has four other distribution centers, three of
which are leased, also located in Memphis. NIKE Brand apparel and
equipment products are also shipped from our leased Foothill Ranch,
California distribution center. Converse and Hurley products are shipped
primarily from leased facilities in Ontario, California.
International Markets
For both fiscal 2015 and fiscal 2014, non-U.S. NIKE Brand and Converse
sales accounted for 54% of total revenues, compared with 55% for fiscal
2013. We sell our products to retail accounts, through our own Direct to
Consumer operations and through a mix of independent distributors,
licensees and sales representatives around the world. We sell to thousands of
retail accounts and ship products from 45 distribution centers outside of the
United States. In many countries and regions, including Canada, Asia, some
Latin American countries and Europe, we have a futures ordering program for
retailers similar to the United States futures ordering program described
above. During fiscal 2015, NIKE’s three largest customers outside of the
United States accounted for approximately 12% of total non-U.S. sales.
Our Direct to Consumer business operates the following number of retail stores outside the United States, in addition to NIKE and Converse owned e-commerce
websites in over 25 countries:
Non-U.S. Retail Stores Number
NIKE Brand factory stores 512
NIKE Brand in-line stores, including employee-only stores 73
Converse stores (including factory stores) 7
TOTAL 592
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