Nike Inc. (NKE) is a global footwear and apparel 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.
- Nike's business results and operations continue to be impacted by the pandemic and its effects on global supply chains.
- Most of Nike's sales are generated by selling footwear to wholesale customers in North America.
- Nike announced in January that it was taking steps to improve its supply chains, including new distribution centers and using technology like AI and machine learning within its distribution centers.
Nike announced in March financial results for Q3 of its 2022 fiscal year (FY), the three-month period ended Feb. 28, 2022. The company posted a net income of $1.4 billion, down 3.7% from the year-ago quarter. Revenue grew 5.0% year over year (YOY) to $10.9 billion. Earnings before interest and taxes (EBIT), a profitability metric Nike uses for its individual business segments, rose 1.4% YOY to $1.7 billion.
Nike said in its financial statement filings for the quarter that the COVID-19 pandemic and its related impacts continue to affect global supply chains and create volatility in the company's global business results and operations. In Greater China, the company continues to experience heightened levels of temporary store closures due to a resurgence of coronavirus cases. The availability of the company's products also continue to be impacted by lengthy inventory transit times, which are due to port congestions, transportation delays, and labor and shipping container shortages.
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 95% 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 in Q3 FY 2022, for example, was: Footwear (66%); Apparel (30%); Equipment (4%); 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 EBIT for its individual business segments. The data reported in the pie charts above and in the share percentage calculations in the breakdowns below exclude negative revenue and EBIT amounts.
NIKE Brand: North America
Nike's North America segment posted $3.9 billion in revenue in Q3 FY 2022, comprising nearly 36% of total revenue. EBIT came in at $967 million, comprising about 31% of the total. The segment's revenue grew 8.9% while EBIT fell 0.3% compared to the year-ago quarter.
NIKE Brand: Europe, Middle East, and Africa
Nike's Europe, Middle East & Africa segment posted $2.8 billion in revenue during Q3 FY 2022, comprising about 26% of total revenue. EBIT was $713 million, about 23% of the total. Revenue and EBIT for the quarter rose 6.5% and 33.8%, respectively.
NIKE Brand: Greater China
Nike's Greater China segment posted $2.2 billion in revenue in Q3 FY 2022, about 20% of total revenue. EBIT was $784 million, comprising more than 25% of the total. Revenue and EBIT were down 5.2% and 19.4%, respectively, compared to the same three-month period a year ago.
NIKE Brand: Asia Pacific and Latin America
Nike's Asia Pacific & Latin America segment posted $1.5 billion in revenue during Q3 FY 2022, about 13% of total revenue. EBIT was $478 million, about 15% of the total. Revenue and EBIT rose 11.1% and 17.2%, respectively.
NIKE Brand: Global Brand Divisions
Nike's Global Brand Divisions segment revenue is 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 $41 million in revenue in Q3 FY 2022, making up a small fraction of total revenue. The segment posted a $975 million loss before interest and taxes while revenue increased nearly sevenfold.
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 $567 million in revenue during Q3 FY 2022, comprising about 5% of the total. It reported $168 million in EBIT, about 5% of the total. Revenue fell 0.5% while EBIT rose 12.0% 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 -$19 million in Q3 FY 2022, a significant deterioration from revenue of $14 million in the year-ago quarter. The segment reported a loss before interest and taxes of $412 million.
Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (55%); Sales through Direct to Consumer (i.e. NIKE Direct) (44%); and a negligible amount from the rest. The Direct to Consumer distribution channel grew 15.9% YOY in Q3 FY 2022, while Wholesale Customers' revenue declined 2.4% YOY.
Nike’s Recent Developments
On Jan. 19, 2022, Nike announced that it was making a number of changes to improve its supply chain in order to better serve customers. The company said that prior to winter 2020, its North American business operated almost entirely through its distribution centers in Memphis, TN. Nike said that it would not only transform those distribution centers into omni-channel facilities, but was adding entirely new distribution centers in Los Angeles, CA, Bethlehem, PA, and Dallas, TX. The company also added a regional service center in Madrid to complement its European logistics center in Belgium. Nike also said it was using new technology, including AI and machine learning, to improve the efficiency at its distribution centers. The company announced several other initiatives to improve its supply chains.
How Nike Reports Diversity and 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|
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2021," Page 1.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2021," Page 5.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 1.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 34.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 25.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 22.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 23.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Page 20.
Nike Inc. "Form 10-Q for the quarterly period ended February 28, 2022," Pages 20-21.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2021," Page 41.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2021," Page 63.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2021," Page 32.
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