Excluding possible acquisitions, Nike is targeting global sales of $23 billion by 2011, compared with $15 billion for the 2006/07 financial year. Some 75 percent of the growth will come from the Nike brand’s focus on six key categories: basketball, running, women’s fitness, men’s training, sport culture and soccer. All these categories will be treated more and more as integrated business units.
Direct sales to consumers over the internet will represent 15 percent of Nike’s turnover by 2011, or $3.5 billion, as compared to 12 percent now. While the wholesale business will represent 80 percent of revenues, retailing will be expanded. The company plans to open 100 Nike stores in premier locations over the next three years, about half of them in the USA. Efforts will be made to create more elevated and differentiated retail experiences for the end constumer. Outlet stores are going to be rolled out further to handle 80 percent of Nike’s closeout business in the future. They now handle 70 percent of them in the USA and an unspecified lower percentage elsewhere.
Nike reiterates its plans for world domination in soccer. The company believes that its Nike Plus technology will be eventually used by 15 percent of the 100 million runners worldwide. The men’s training channel, which includes team sports, and the women’s fitness segments are expected to grow by low double digits. The sport culture business can be expanded beyond the athletic channel.
With annual sales of about $600 million, Nike Golf is the second largest unit now in the “other brands” segment of Nike’s total business after the Jordan business, which is at about $700 million. Converse is worth about $450 million, but including the wholesale value of the licensees’ sales it is at roughly $1 billion. Cole-Haan is also about $450 million and has the potential to hit $1 billion. Hurley is now at $130 million and Nike-Bauer Hockey at $150 million. The Exeter division, which is mostly operating on licensed revenues, is now at $36 million but the wholesale value is roughly ten times higher.
Geographically, Nike will attempt to generate deeper growth in its four biggest markets - the USA, the UK, Japan and China - which together account for 61 percent of sales. The management believes that China, where growth is the highest, is likely to become its second largest market after the USA in the future. Russia, India and Brazil could each contribute annual revenues of $1 billion by 2011. In these big countries, Nike will focus on creating brand energy mainly in the bigger cities.
Nike doesn’t see a significant change in the percentage of sales spent on demand creation, but it will shift more resources to digital media. Nike also sees room for more operational and supply chain improvements. A tighter supply chain should raise the proportion of on-time deliveries of integrated footwear and apparel up from 80 to 95 percent by 2011. Days of outstanding inventory can be reduced to 80 from 86, and logistics costs can be slimmed down from 6.6 to 6.0 percent. Lean manufacturing may be expanded from 40 to 90 percent of the footwear production, budgeted to reach more than 225 million pairs. The result could be a saving of 15 cents per pair.
