Nike 2012 Annual Report Download - page 24

PART II
Fiscal 2012 Compared to Fiscal 2011
Revenues for North America increased 17% for fiscal 2012, driven by growth
in both wholesale and Direct to Consumer revenues. Our category offense
continued to deliver innovative products, deep brand connections and
compelling retail experiences to consumers, driving demand for NIKE Brand
products across all seven key categories. North America’s Direct to
Consumer revenues grew 19% for fiscal 2012, fueled by 15% growth in
comparable store sales.
For fiscal 2012, footwear revenue in North America increased 15%, driven by
an increase in both unit sales and average selling prices. Unit sales rose at a
double-digit rate while average selling price per pair grew at a mid-single-digit
rate, reflective of product price increases, partially offset by higher discounts
on close-out sales. The overall increase in footwear sales was driven by
growth in all key categories, most notably Running, Basketball, Women’s
Training and Sportswear.
Compared to the prior year, apparel revenue for North America increased
18%, primarily driven by a low-double-digit percentage growth in average
selling price per unit and a mid-single-digit percentage growth in unit sales.
The increase in average selling price per unit was reflective of product price
increases and a greater mix of higher price point products. The overall
increase in apparel sales was driven by double-digit percentage growth
across most key categories, including Men’s Training, Running and
Basketball.
For fiscal 2012, EBIT for North America increased 16% as revenue growth
and improved selling and administrative expense leverage more than offset a
decline in gross margin. Gross margin decreased 90 basis points during fiscal
2012, primarily due to higher product input costs and lower gross margins on
close-out sales, which more than offset the favorable impact of selling price
increases, lower air freight costs and the growth of our Direct to Consumer
business. Selling and administrative expense as a percentage of revenue
decreased by 70 basis points for fiscal 2012, as both demand creation and
operating overhead expense grew at a slower rate than revenues.
Fiscal 2011 Compared to Fiscal 2010
Revenues for North America increased 13%, driven by double-digit
percentage growth in both wholesale and Direct to Consumer revenues.
Contributing to the wholesale revenue growth was strong product category
presentations at our wholesale customers, improved product lines and earlier
shipments of summer season products. North America’s Direct to Consumer
revenues grew 19%, which contributed approximately 4 percentage points to
North America’s revenue increase. The growth in the Direct to Consumer
business was fueled by 14% growth in comparable store sales.
For fiscal 2011, the increase in North America footwear revenue was primarily
driven by double-digit percentage growth in Running, Men’s and Women’s
Training and Football (Soccer) and a single-digit percentage growth in
Basketball, partially offset by a low-single-digit percentage decline in sales of
our NIKE Brand Sportswear products.
The year-over-year increase in North America apparel revenues was primarily
driven by double-digit percentage growth in most key categories, most
notably Men’s Training, Running, Basketball and Women’s Training.
For fiscal 2011, the increase in North America’s EBIT was primarily the result
of revenue growth and leverage on selling and administrative expense, which
more than offset a lower gross margin percentage. The decline in gross
margin percentage was due primarily to increased air freight and product
input costs, which more than offset the favorable impact from the growth of
our Direct to Consumer business and fewer close-out sales.
Western Europe
(Dollars in millions) Fiscal 2012 Fiscal 2011
FY12 vs. FY11
% Change
FY12 vs. FY11
% Change
Excluding
Currency
Changes Fiscal 2010
FY11 vs. FY10
% Change
FY11 vs. FY10
% Change
Excluding
Currency
Changes
Revenues by:
Footwear $ 2,526 $ 2,345 8% 5%$ 2,284 3% 8%
Apparel 1,377 1,303 6% 2% 1,311 -1% 4%
Equipment 241 220 10% 5% 244 -10% -5%
TOTAL REVENUES $ 4,144 $ 3,868 7% 4%$ 3,839 1% 6%
Revenues by:
Sales to Wholesale Customers $ 3,556 $ 3,385 5% 2%$ 3,380 0% 5%
Sales Direct to Consumer 588 483 22% 18% 459 5% 10%
TOTAL REVENUES $ 4,144 $ 3,868 7% 4%$ 3,839 1% 6%
EARNINGS BEFORE INTEREST
AND TAXES $ 597 $ 730 -18% $ 807 -10%
Fiscal 2012 Compared to Fiscal 2011
On a currency neutral basis, revenues for Western Europe increased 4% for
fiscal 2012, as most territories reported revenue growth, which more than
offset revenue declines in the U.K. & Ireland and Italy. Revenues for the U.K. &
Ireland, the largest market in Western Europe, declined 3% for the fiscal 2012
period. Western Europe’s Direct to Consumer revenues grew 18% for fiscal
2012, including 8% growth in comparable store sales.
Excluding changes in currency exchange rates, footwear revenue in Western
Europe increased 5% for fiscal 2012, primarily driven by a low-single-digit
percentage growth in both unit sales and average selling price per pair,
primarily reflective of product price increases, partially offset by higher
discounts on in-line and close-out sales. The overall increase in footwear sales
was driven by growth in Running, Basketball and Football (Soccer), which
more than offset a decline in Action Sports.
Excluding changes in currency exchange rates, apparel revenue in Western
Europe increased 2% for fiscal 2012. The year-over-year change was
primarily driven by a mid-single-digit percentage increase in average selling
price per unit, reflective of higher product prices. Partially offsetting the
increase in average selling price per unit was a mid-single-digit percentage
decline in unit sales. The overall increase in apparel sales was driven by
growth in Football (Soccer) and Running, which more than offset a decline in
Sportswear.
On a reported basis, revenues for Western Europe increased 7% for fiscal
2012. However, EBIT fell 18%, primarily driven by a 350 basis point decline in
gross margin and higher selling and administrative expense as a percentage
of revenues. The decline in gross margin was driven by higher product input
costs and the negative impact from changes in standard currency rates,
which more than offset the favorable impact of product price increases and
the growth of our Direct to Consumer business. The increase in selling and
administrative expense as a percentage of revenues was mainly driven by an
increased level of demand creation spending around the European Football
Championships and London Summer Olympics. Also reflected in Western
Europe’s fiscal 2012 results was a $24 million charge relating to the
restructuring of its operations.
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