Margins decline for Nike, but growth in China
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Footwear giant Nike Inc lost traction in its first quarter to the end of August, its gross margin declining 180 basis points to 43.7 per cent.
It attributes this mainly to unfavourable currency exchange rates and, to a lesser extent, more discount sales.
Sustained revenue growth in international markets, particularly China, was offset by an expected decline in North America wholesale revenue.
Chairman/president/CEO Mark Parker says the group captured near-term opportunities during the quarter through its new company alignment, simplifying its geographical structure from six regions to four – North America; Europe, Middle East and Africa (EMEA); Greater China; and Asia Pacific and Latin America (APLA).
Nike’s revenues at $9.1 billion were flat on both a reported and currency-neutral basis.
Revenues for the Nike brand were $8.6 billion, up 2 per cent, driven by growth in Greater China, EMEA and APLA, as well as growth in sportswear. Converse revenues, at $483 million, were down 16 per cent.
Questions & Answers
Q.What were the primary reasons for Nike's gross margin decline in the first quarter?
What were the primary reasons for Nike's gross margin decline in the first quarter?
Nike attributes the 180 basis point decline in its gross margin mainly to unfavourable currency exchange rates. To a lesser extent, more discount sales also contributed to this reduction in profitability during the quarter.
Q.Which international markets showed revenue growth for Nike in the first quarter?
Which international markets showed revenue growth for Nike in the first quarter?
Nike experienced sustained revenue growth in international markets, specifically in Greater China, EMEA (Europe, Middle East and Africa), and APLA (Asia Pacific and Latin America). Growth in sportswear also contributed to the Nike brand's revenues.
Q.How has Nike recently restructured its geographical operations?
How has Nike recently restructured its geographical operations?
Nike has simplified its geographical structure, reducing it from six regions to four. The new regions are North America; Europe, Middle East and Africa (EMEA); Greater China; and Asia Pacific and Latin America (APLA).
Q.What was the performance of the Converse brand during this quarter?
What was the performance of the Converse brand during this quarter?
Converse revenues were reported at $483 million for the quarter. This figure represents a 16 per cent decrease compared to the previous period, indicating a decline for the brand.
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