Nike 2016 Annual Report Download - page 5

PART I
Sales and Marketing
Financial information about geographic and segment operations appears in
Note 17 — 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. Refer to Item 1A. Risk Factors.
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. Converse Direct to Consumer operations, including
e-commerce, are reported within the Converse operating segment results.
United States Market
For fiscal 2016, NIKE Brand and Converse sales in the United States
accounted for approximately 47% of total revenues, compared to 46% for
both fiscal 2015 and fiscal 2014. 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 2016, our three largest customers
accounted for approximately 25% 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 2016, 84% of our U.S. wholesale footwear shipments were made under
the futures program, compared to 87% in fiscal 2015 and 86% in fiscal 2014.
In fiscal 2016, 66% of our U.S. wholesale apparel shipments were made
under the futures program, compared to 67% in fiscal 2015 and 71% in fiscal
2014.
Our Direct to Consumer operations sell NIKE Brand, Jordan Brand, Hurley
and Converse products to consumers through our e-commerce website,
www.nike.com. In addition, 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 196
NIKE Brand in-line stores, including employee-only stores 34
Converse stores (including factory stores) 103
Hurley stores (including factory and employee stores) 29
TOTAL 362
In the United States, NIKE has five significant distribution centers located in
Memphis, Tennessee, two of which are owned and three are leased. 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. Smaller
leased distribution facilities are located in various parts of the United States.
International Markets
For fiscal 2016, non-U.S. NIKE Brand and Converse sales accounted for 53%
of total revenues, compared to 54% for both fiscal 2015 and fiscal 2014. 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 42 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
2016, NIKE’s three largest customers outside of the United States accounted
for approximately 13% of total non-U.S. sales.
In addition to NIKE and Converse owned e-commerce websites in over 40 countries, our Direct to Consumer business operates the following number of retail
stores outside the United States:
Non-U.S. Retail Stores Number
NIKE Brand factory stores 588
NIKE Brand in-line stores, including employee-only stores 72
Converse stores (including factory stores) 23
TOTAL 683
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