Nike Inc. (NKE) is a global company that designs, develops, markets and sells athletic footwear, apparel, equipment, accessories, and services. Although primarily designed for athletic use, many of its products are worn for casual or leisure activities. The majority of Nike's products are manufactured by independent contractors, and are sold either direct-to-consumers through Nike retail outlets and digital platforms, or through independent distributors, licensees, and sales representatives.
Nike, which is based in Oregon, has a large number of major global rivals, including Adidas AG (ADDYY), ASICS Corp. (7936), Lululemon Athletica Inc. (LULU), Puma SE (PUMSY), and Under Armour Inc. (UAA).
- Nike designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories.
- Most of Nike's sales are generated by selling footwear to wholesale customers in North America.
- Nike's direct-to-consumer sales business grew in Q2 FY 2021, while sales from its wholesale business fell.
- Nike's business continues to be impacted by the COVID-19 pandemic.
Nike posted net income of $1.3 billion on $11.2 billion of revenue during Q2 of its 2021 fiscal year (FY), the three-month period that ended November 30, 2020. Net income rose 12.2% in Q2 FY 2021 compared to the same quarter a year ago. Revenue grew 8.9% compared to the year-ago quarter.
Nike said that its revenue performance was impacted by strength in digital growth, which was offset by lower revenue in its wholesale business and its company-owned stores. The company also noted that it experienced temporary closures of stores in regions seeing rising COVID-19 cases and that some regions continue to experience declines in physical retail traffic. However, the majority of Nike's stores remain open.
Nike’s Business Segments
Nike breaks its financial metrics into three categories: NIKE Brand; Converse; and Corporate. The NIKE Brand also is further broken down into geographical segments: North America; Europe, Middle East & Africa; Greater China; Asia Pacific & Latin America; and Global Brand Divisions. The NIKE Brand segment comprises 96% of the company's total revenue.
Nike also breaks out revenue, but not profits, for its major product lines and distribution channels. The share of revenue generated by each of Nike's product lines, for example, is: Footwear (64%); Apparel (32%); Equipment (3%); and Other. A negligible amount is attributable to Other, which includes revenue from licensing businesses of the Global Brand Divisions and Converse segments, and to foreign currency hedge gains and losses accounted for in the Corporate segment.
Nike reports both revenue and earnings before interest and taxes (EBIT), its primary measure for evaluating operating performance, for its geographic business segments. The data reported in the pie charts above and in the share percentage calculations in the breakdowns below exclude segments with negative revenue or negative profits.
NIKE Brand: North America
Nike's North America segment posted $4.0 billion in revenue in Q2 FY 2021, comprising nearly 36% of total revenue. EBIT came in at $1.0 billion, comprising about 33% of the total. The segment's revenue grew 0.6% while EBIT rose 16.9% compared to the year-ago quarter.
NIKE Brand: Europe, Middle East & Africa
Nike's Europe, Middle East & Africa segment posted $3.0 billion in revenue during Q2 FY 2021, comprising about 26% of total revenue. EBIT was $660 million, about 21% of the total. Revenue and EBIT for the quarter rose 16.6% and 29.4%, respectively.
NIKE Brand: Greater China
Nike's Greater China segment posted $2.3 billion in revenue in Q2 FY 2021, about 20% of total revenue. EBIT was $891 million, comprising nearly 29% of the total. Revenue and EBIT were up 24.4% and 28.4%, respectively, compared to the same three-month period a year ago.
NIKE Brand: Asia Pacific & Latin America
Nike's Asia Pacific & Latin America segment posted $1.5 billion in revenue during Q2 FY 2021, about 13% of total revenue. EBIT was $424 million, about 14% of the total. Revenue and EBIT rose 0.2% and 12.5%, respectively.
NIKE Brand: Global Brand Divisions
Nike's Global Brand Divisions segment revenue is primarily attributable to NIKE Brand's licensing businesses that are not part of any of the geographic segments, demand creation and operating overhead expense, and costs associated with its global digital operations and enterprise technology. The division posted $8 million in revenue during Q2 FY 2021, making up less than 0.1% of total revenue. The segment posted an $841 million loss before interest and taxes as revenue fell 20.0%.
Nike's Converse segment is engaged in the design, distribution, licensing and sale of casual sneakers, apparel and accessories under the following trademarks: Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell. The segment posted $476 million in revenue during Q2 FY 2021, comprising about 4% of the total. It reported $87 million in EBIT, about 3% of the total. Revenue fell 0.8% while EBIT dropped 3.3% compared to the year-ago quarter.
Nike's Corporate segment revenue primarily consists of foreign currency hedge gains and losses related to revenues generated by Nike's other operating segments. The segment posted revenue of $26 million in Q2 FY 2021, comprising a scant 0.2% of total revenue. The segment reported a loss before interest and taxes of $718 million despite a 1,200.0% rise in revenue.
Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (59%); Sales through Direct to Consumer (i.e. NIKE Direct) (40%); and a negligible amount from the rest. The Direct to Consumer distribution channel grew 31.7% in Q2 FY 2021, while Wholesale Customers revenue declined 2.7%.
Nike’s Recent Developments
Nike announced in late July a series of senior leadership changes as part of its Consumer Direct Acceleration (CDA) program. The CDA program, first announced in June, aims to accelerate its digital transformation in order to generate long-term growth and profitability. The company expects the leadership changes to result in a net loss of jobs across the company, which will result in pre-tax one-time employee termination costs of somewhere between $200 million to $250 million.
How Nike Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Nike and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Nike releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Nike discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Nike breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.
|Nike Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
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Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 73. Accessed Feb. 29, 2020.
Nike Inc. "Form 10-Q for the quarterly period ended November 30, 2020," Page 1. Accessed Jan. 8, 2021.
Nike Inc. "NIKE, INC. REPORTS FISCAL 2021 SECOND QUARTER RESULTS," Page 1. Accessed Jan. 8, 2021.
Nike Inc. "Form 10-Q for the quarterly period ended November 30, 2020," Page 22. Accessed Jan. 8, 2021.
Nike Inc. "Form 10-Q for the quarterly period ended November 30, 2020," Pages 19 & 20. Accessed Jan. 8, 2021.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 99. Accessed Feb. 29, 2020.
Nike Inc. "Form 10-Q for the quarterly period ended November 30, 2020," Page 21. Accessed Jan. 8, 2021.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2020," page 62. Accessed Aug. 24, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 103. Accessed Feb. 29, 2020.
Nike Inc. "Form 10-Q for the quarterly period ended November 30, 2020," Page 19. Accessed Jan. 8, 2021.
Nike Inc. "Nike Announces Senior Leadership Changes to Unlock Future Growth Through the Consumer Direct Acceleration." Accessed Aug. 24, 2020.