The Nike group ended its financial year on May 31 with an impressive 12 percent increase in futures orders, including gains of 7 percent in the USA, 12.5 percent in Europe, 19 percent in the Asia/Pacific region and 15 percent in the Americas. Only 1 percentage point of the growth in Europe was due to the weaker dollar, and orders from France and the UK were finally up, after a long depression.
Group sales rose 9 percent in the 4th quarter as well as for the full financial year. They grew by 12 percent in dollars and by only 3 percent in local currencies in Europe in the latest quarter, but sales in France turned positive in dollars in both of the last two quarters. In local currencies, both France and the UK continued to post sales declines in the 4th quarter. Instead, emerging European markets showed a combined sales increase of more than 30 percent, led by Greece, Russia and Turkey.
Nike says it gained four points of market share in the running segment in Germany last year, obtaining the #2 position in the market. According to consumer research, it also gained four points in the overall Chinese sporting goods market, where its sales grew by 27 percent, raising its lead over its major competitor. China should become Nike’s second largest market by 2009.
Nike spent 10 percent more on demand creation in the past year overall, but a 10 percent decline in these investments during the 4th quarter helped the group to improve its net income for the period by 32 percent to $437.9 million on 9 percent higher revenues of $4,383.2 million. In turn, this strong performance in the 4th quarter and the nice futures numbers allowed the management to announce a 7 percent increase in net profit for the full year to $1,491.5 million on 9 percent higher revenues of $16.3 billion, and to predict a sales increase in the high single digits for the current fiscal year.
The EMEA region contributed pre-tax profit of more than $1 billion for the first time, rising by 4 percent for the year to $1,00.7 million, including a 29 percent increase in the 4th quarter to $292.9 million on 12 percent higher revenues of $1,291.4 million. European sales began to accelerate in the 2nd half. On a currency-neutral basis, footwear and equipment revenues were up by 4 and 10 percent in the latest quarter, respectively, but apparel sales were up only slightly due to the World Cup effect on their year-ago levels.
The Americas region had the worst performance, with flat sales in the last quarter attributed to last year’s World Cup and to a temporary weakness on the Brazilian market, where Nike has taken over its apparel license.
Nike’s new chief executive, Mark Parker, stressed the growing contribution of the group’s “other brands” to its overall performance, indicating that they are expected to contribute one-quarter of the planned corporate growth to $23 billion a year by 2011. As a group, these brands raised their sales by 16 percent last year to $2.26 billion, and their pre-tax profit grew by 98 percent to $303.7 million.
Nike expects to sustain the growth of its various brands by working more closely with its retail partners on differentiating their stores from their competitors and on the introduction of new concepts that will deliver premium experiences for consumers (see Urban Jungle story further down in this issue). Product innovation in footwear and apparel, including the introduction of lighter soccer shoes with a carbon composite chassis, should be another major factor of growth.
