Surpassing the management's expectations, Nike reported a broad-based sales increase of 11 percent on a currency-neutral basis for the financial year ended on May 31, driven by innovations, the group's “consumer direct offense” initiative and other aspects of its strategic transformation.
In reported dollars, this meant an increase of 7 percent – or more than $4 billion – for the group to $39.1 billion, including an 8 percent increase for the Nike brand to $37.2 billion. About 100 percent of the incremental growth came from the release of new products, and about half of it from an increase in consumer-direct sales – online and offline.
The gross margin improved by 0.9 percentage points to 44.7 percent for the year, due primarily to higher average selling prices, foreign currencies and higher retail sales. Operating expenses grew by 13 percent to $8.9 billion, but this didn't prevent a 108 percent jump in the group's net profit for the year to $4.03 billion, thanks largely to lower taxes.
About one-quarter of the incremental growth was invested in new capabilities, including e-commerce, the acquisition of Zodiac and Invertex to better capture consumer analytics, and Nike's new Houses of Innovation in New York and Shanghai, whose revenues are exceeding forecasts.
Direct-to-consumer revenues grew by 16 percent in constant dollars for Nike, reaching a level of $11.8 billion, with a 6 percent increase on a comparable store basis. They represented 31.6 percent of total revenues. Wholesale revenues went up by 10 percent in constant currencies, and many relatively small wholesale clients used a new digital Nike.net purchasing platform. There is speculation that they may be denied some hot products reserved for the company's more strategic wholesale partners.
The growth rate in constant currencies softened slightly to 10 percent in the fourth quarter. The gross margin grew by 0.8 percentage points, compared with an increase of 0.9 percentage points for the full financial year. In reported terms, sales moved up by 4 percent to $10.18 billion in the quarter, but net earnings fell by 13 percent to $989 million.
On the other hand, sales of basketball shoes accelerated and the more lifestyle-oriented sportswear category enjoyed a sales increase of 20 percent in the quarter, lifted by products inspired by the React and Air platforms.
