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).

Key Takeaways

  • 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 Q1 FY 2021, while sales from its wholesale business fell.
  • Nike's business continues to be adversely impacted by the COVID-19 pandemic.

Nike’s Financials

Nike posted net income of $1.5 billion on $10.6 billion of revenue during Q1 of its 2021 fiscal year (FY), ended August 31, 2020. Net income rose 11.0% in Q1 FY 2021 compared to the same quarter a year ago. Revenue fell by 0.6% compared to the year-ago quarter. Lower selling and administrative expenses offset the decline in gross margin and revenue, helping to boost net income.

Nike noted that it continues to experience declines in physical retail traffic in its stores due to the impacts of COVID-19 and safety-related measures. Most of the company's stores were open during the quarter. The company also said that it experienced strong growth in its digital sales.

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 94.6% of the company's total revenue and 94.6% of the company's total EBIT.

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 (68.7%); Apparel (27.3%); Equipment (3.6%); 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. Only Footwear generated higher revenue in Q1 FY 2021 compared to the year-ago quarter.

Nike reports both revenue and EBIT, its primary measure for evaluating operating performance, for its geographic business segments. The data reported in the pie charts above and in the breakdowns below exclude segments with negative revenue or negative profits.

NIKE Brand: North America

Nike's North America segment posted $4.2 billion in revenue in Q1 FY 2021, comprising nearly 40% of total revenue. EBIT came in at $1.3 billion, comprising almost 42% of the total. The segment's revenue fell 1.6% while EBIT rose 18.4% compared to the year-ago quarter.

NIKE Brand: Europe, Middle East & Africa

Nike's Europe, Middle East & Africa segment posted $2.9 billion in revenue during Q1 FY 2021, comprising about 27% of total revenue. EBIT was $692 million, about 22% of the total. Revenue and EBIT for the quarter rose 4.9% and 13.6%, respectively.

NIKE Brand: Greater China

Nike's Greater China segment posted $1.8 billion in revenue in Q1 FY 2021, nearly 17% of total revenue. EBIT was $688 million, comprising about 22% of the total. Revenue and EBIT were up 6.0% and 2.8%, 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 $1.1 billion in revenue during Q1 FY 2021, about 10% of total revenue. EBIT was $280 million, about 9% of the total. Revenue and EBIT fell 18.3% and 17.9%, 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 $4 million in revenue during Q1 FY 2021, making up less than 0.1% of total revenue. The segment posted a $853 million loss before interest and taxes as revenue fell 33.3%.

Converse

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 $563 million in revenue during Q1 FY 2021, comprising about 5% of the total. It reported $168 million in EBIT, about 5% of the total. Revenue grew 1.4% while EBIT rose 21.7% compared to the year-ago quarter.

Corporate

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 $13 million in Q1 FY 2021, comprising a scant 0.1% of total revenue. The segment reported a loss before interest and taxes of $497 million despite a 44.4% rise in revenue.

Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (63.6%); Sales through Direct to Consumer (i.e. NIKE Direct) (36.1%); and a negligible amount from the rest. Direct to Consumer was the only distribution channel that grew in Q1 FY 2021, rising 12.0% compared to the same quarter a year ago.

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          
C-Suite
 
       
General Management      
Employees