Nike 2016 Annual Report Download - page 30

PART II
Central & Eastern Europe
(Dollars in millions) Fiscal 2016 Fiscal 2015 % Change
% Change
Excluding
Currency
Changes Fiscal 2014 % Change
% Change
Excluding
Currency
Changes
Revenues by:
Footwear $ 882 $ 827 7% 23% $ 763 8% 22%
Apparel 463 499 -7% 9% 532 -6% 5%
Equipment 86 95 -9% 7% 92 3% 14%
TOTAL REVENUES $ 1,431 $ 1,421 1% 17% $ 1,387 2% 15%
Revenues by:
Sales to Wholesale Customers $ 1,215 $ 1,241 -2% 13% $ 1,245 0% 11%
Sales Direct to Consumer 216 180 20% 46% 142 27% 48%
TOTAL REVENUES $ 1,431 $ 1,421 1% 17% $ 1,387 2% 15%
EARNINGS BEFORE INTEREST AND TAXES $ 289 $ 249 16% $ 279 -11%
Fiscal 2016 Compared to Fiscal 2015
On a currency neutral basis, fiscal 2016 revenues for Central & Eastern
Europe increased 17%, with double-digit growth in nearly every territory.
Revenue growth was led by two of our largest territories, Turkey and Russia,
which increased 26% and 18%, respectively, while our distributors business
also grew 16%. Revenues grew in nearly every key category, driven by
Sportswear, Running and Football (Soccer). DTC revenues increased 46%,
fueled by comparable store sales growth of 27% and the addition of new
stores.
Constant currency footwear revenue growth in fiscal 2016 was driven by
growth in nearly every key category, led by Sportswear and Running. Fiscal
2016 unit sales of footwear increased 7%. Higher ASP per pair contributed
approximately 16 percentage points of footwear revenue growth, primarily
driven by higher full-price ASP, largely reflecting inflationary conditions in
certain territories.
The currency-neutral growth in apparel revenue in fiscal 2016 was attributable
to growth in nearly all key categories, most notably Football (Soccer) and
Running. Unit sales of apparel decreased 2% for fiscal 2016. Higher ASP per
unit contributed approximately 11 percentage points of apparel revenue
growth, primarily driven by higher full-price ASP, largely reflecting inflationary
conditions in certain territories.
On a reported basis, EBIT increased 16% for fiscal 2016, despite the negative
impact of changes in foreign currency exchange rates, primarily the Russian
Ruble and Turkish Lira. EBIT grew faster than reported revenues due to
significant gross margin expansion and selling and administrative expense
leverage. Gross margin increased 140 basis points as significantly higher full-
price ASP, warehousing efficiencies and the favorable impact of a higher
proportion of revenues from our higher-margin DTC business more than
offset unfavorable standard foreign currency exchange rates and shifts in mix
to higher-cost products. Selling and administrative expense decreased as a
percent of revenues despite higher operating overhead to support DTC
expansion and higher demand creation expense due to increased sports
marketing costs and spending to support brand events.
Fiscal 2015 Compared to Fiscal 2014
Excluding changes in currency exchange rates, Central & Eastern Europe
revenues for fiscal 2015 grew 15%, attributable to increases in most
territories. Turkey grew 23% and our distributors business grew 18%, while
revenues declined in Israel, our smallest territory. On a category basis,
revenue growth was driven by increases in most key categories, primarily
Sportswear and Running. DTC revenues increased 48%, driven by strong
comparable store sales growth of 28%, the addition of new stores and online
sales growth.
The constant currency growth in footwear revenue in fiscal 2015 was driven
by growth in nearly all key categories, most notably Sportswear and Running.
Fiscal 2015 unit sales of footwear increased 11%. Higher ASP per pair
contributed approximately 11 percentage points of footwear revenue growth,
driven by higher full-price ASP, primarily reflecting inflationary conditions in
certain territories.
The constant currency growth in apparel revenue in fiscal 2015 resulted from
growth in most key categories, led by Sportswear and Running, partially offset
by a decline in Football (Soccer) due to comparison to strong sales related to
the World Cup in fiscal 2014. Unit sales of apparel increased 1% for fiscal
2015. Higher ASP per unit contributed approximately 4 percentage points of
apparel revenue growth, primarily due to higher full-price ASP reflecting
inflationary conditions in certain territories.
On a reported basis, EBIT declined 11% for fiscal 2015, primarily reflecting the
impact of weakening foreign currency exchange rates. Reported revenue
increases and slight selling and administrative expense leverage were more
than offset by lower gross margin. Gross margin decreased 340 basis points
as higher product costs and unfavorable standard foreign currency exchange
rates were only partially offset by higher full-price ASP. Selling and
administrative expense decreased as a percent of revenue despite increases
in both demand creation and operating overhead. Operating overhead
increased primarily as a result of investments in our growing DTC business,
while demand creation increased as a result of higher sports marketing costs.
NIKE, INC. 2016 Annual Report and Notice of Annual Meeting 83
FORM 10-K