Nike 2016 Annual Report Download - page 29

PART II
Western Europe
(Dollars in millions) Fiscal 2016 Fiscal 2015 % Change
% Change
Excluding
Currency
Changes Fiscal 2014 % Change
% Change
Excluding
Currency
Changes
Revenues by:
Footwear $ 3,985 $ 3,876 3% 14% $ 3,299 17% 25%
Apparel 1,628 1,552 5% 16% 1,427 9% 14%
Equipment 271 277 -2% 8% 253 9% 15%
TOTAL REVENUES $ 5,884 $ 5,705 3% 14% $ 4,979 15% 21%
Revenues by:
Sales to Wholesale Customers $ 4,429 $ 4,451 0% 10% $ 4,022 11% 17%
Sales Direct to Consumer 1,455 1,254 16% 28% 957 31% 40%
TOTAL REVENUES $ 5,884 $ 5,705 3% 14% $ 4,979 15% 21%
EARNINGS BEFORE INTEREST AND TAXES $ 1,434 $ 1,275 12% $ 855 49%
Fiscal 2016 Compared to Fiscal 2015
Excluding changes in currency exchange rates, Western Europe revenues for
fiscal 2016 increased 14% with double-digit growth in every territory. Growth
was led by our largest territories, the UK & Ireland and AGS (Austria, Germany
and Switzerland), which grew 12% and 16%, respectively. On a category
basis, revenues grew for every key category, most notably Sportswear,
Football (Soccer) and the Jordan Brand. DTC revenues grew 28% for fiscal
2016, due to strong online sales growth, the addition of new stores and
comparable store sales growth of 13%.
Currency-neutral footwear revenue growth was fueled by increases in most
key categories, led by Sportswear and the Jordan Brand. For fiscal 2016, unit
sales of footwear increased 10%. Higher ASP per pair contributed
approximately 4 percentage points of footwear revenue growth, driven by
higher full-price ASP and the favorable impact of an increase in the proportion
of revenues from our higher-priced DTC business, partially offset by higher
off-price mix.
The constant currency apparel revenue growth was attributable to increases
in every key category, most notably Sportswear, with Football (Soccer) also
providing strong growth. Unit sales of apparel for fiscal 2016 increased 11%.
Higher ASP per unit contributed approximately 5 percentage points of
apparel revenue growth, primarily driven by the favorable impact of an
increase in the proportion of revenues from our higher-priced DTC business
and higher full-price ASP.
On a reported basis, EBIT grew 12% for fiscal 2016, despite the negative
translation impact from changes in foreign currency exchange rates, most
notably the Euro. EBIT grew at a higher rate than revenue as selling and
administrative expense leverage and the favorable settlement of a legal
judgment related to a bankruptcy case reflected in Other (income) expense,
net, were only partially offset by lower gross margin. Gross margin declined
10 basis points as unfavorable standard foreign currency exchange rates and
higher off-price mix were mostly offset by higher full-price ASP, shifts in mix to
lower-cost products and growth in our higher-margin DTC business. Selling
and administrative expense was lower as a percent of revenues despite
higher operating overhead, primarily to support DTC expansion. Demand
creation increased slightly as higher spending for DTC and other demand
creation costs more than offset lower sports marketing costs.
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 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%. Higher ASP
per pair contributed approximately 5 percentage points of footwear revenue
growth, driven equally by higher full-price ASP 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 ASP per unit was flat.
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 full-price ASP, 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.
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