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.
- Both Nike's direct-to-consumer sales business and Greater China operations grew in FY 2020, while other segments and distribution channels declined.
- Nike's annual revenue and net income were adversely impacted by the COVID-19 pandemic.
Nike posted net income of $2.5 billion on $37.4 billion of revenue during its FY 2020, which ended May 31, 2020. Net income fell by 37.0% in FY 2020 compared to a rise of 108.4% in FY 2019. Revenue fell by 4.4% compared to a rise of 7.5% in FY 2019.
Nike noted that its financial results for FY 2020 were adversely impacted by the COVID-19 pandemic. Its Greater China segment had a difficult fiscal third quarter due to the temporary closure of approximately 75% of Nike-owned and partner stores in the region. The spread of the virus to other parts of the world in the fourth quarter led to more negative impacts on operating results. Approximately 90% of the companies stores across its other geographic segments, including North America, Europe Middle East & Africa, and Asia Pacific & Latin America, were closed for about eight weeks.
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 95.1% of the company's total revenue and 96.5% 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 (62.3%); Apparel (29.3%); Equipment (3.4%); 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. All of Nike's product lines experienced falling sales in FY 2020.
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 $14.5 billion in revenue in FY 2020, comprising nearly 39% of total revenue. EBIT came in at $2.9 billion, comprising almost 35% of the total. During FY 2020, the segment's annual revenue and EBIT fell 8.9% and 26.1%, respectively.
NIKE Brand: Europe, Middle East & Africa
Nike's Europe, Middle East & Africa segment posted $9.3 billion in revenue during FY 2020, comprising about 25% of total revenue. EBIT was $1.5 billion, about 18% of the total. Revenue and EBIT for the year fell 4.7% and 22.8%, respectively.
NIKE Brand: Greater China
Nike's Greater China segment posted $6.7 billion in revenue in FY 2020, nearly 18% of total revenue. EBIT was $2.5 billion, comprising about 30% of the total. It was the only one of Nike's geographic segments that reported annual growth. Revenue and EBIT were up 7.6% and 4.8%, respectively.
NIKE Brand: Asia Pacific & Latin America
Nike's Asia Pacific & Latin America segment posted $5.0 billion in revenue during FY 2020, about 13% of total revenue. EBIT was $1.2 billion, about 14% of the total. Annual revenue and EBIT fell 4.3% and 10.5%, 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. The division posted $30 million in revenue during FY 2020, making up a scant 0.1% of total revenue. The segment posted a $3.5 billion loss before interest and taxes as revenue fell 28.6%.
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 $1.8 billion in revenue during FY 2020, comprising about 5% of the total. It reported $297 million in EBIT, almost 4% of the total. Both revenue and EBIT declined.
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 a loss before interest and taxes of $2.0 billion.
Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (65.0%); Sales through Direct to Consumer (i.e. NIKE Direct) (34.7%); and a negligible amount from the rest. Direct to Consumer was the only distribution channel that grew in FY 2020, rising 5.5%.
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|
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 69. Accessed Feb. 29, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 73. Accessed Feb. 29, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2020," page 25. Accessed Aug. 24, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2020," page 27. Accessed Aug. 24, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2020," page 35. Accessed Aug. 24, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2020," page 31. Accessed Aug. 24, 2020.
Nike Inc. "Form 10-K for the fiscal year ended May 31, 2019," Page 99. Accessed Feb. 29, 2020.
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-K for the fiscal year ended May 31, 2020," page 88. Accessed Aug. 24, 2020.
Nike Inc. "Nike Announces Senior Leadership Changes to Unlock Future Growth Through the Consumer Direct Acceleration." Accessed Aug. 24, 2020.