Nike 2012 Annual Report Download - page 4

PART I
Sales and Marketing
Financial information about geographic and segment operations appears in
Note 17 — Operating Segments and Related Information of the
accompanying Notes to the Consolidated Financial Statements on page 62.
We experience moderate fluctuations in aggregate sales volume during the
year. Historically, revenues in the first and fourth fiscal quarters have slightly
exceeded those in the second and third quarters. However, the mix of
product sales may vary considerably as a result of changes in seasonal and
geographic demand for particular types of footwear, apparel and equipment.
Because NIKE is a consumer products company, the relative popularity of
various sports and fitness activities and changing design trends affect the
demand for our products. We must therefore respond to trends and shifts in
consumer preferences by adjusting the mix of existing product offerings,
developing new products, styles and categories, and influencing sports and
fitness preferences through aggressive marketing. Failure to respond in a
timely and adequate manner could have a material adverse effect on our sales
and profitability. This is a continuing risk.
We report our NIKE Brand operations based on our internal geographic
organization. Each NIKE Brand geography operates predominantly in one
industry: the design, development, marketing and selling of athletic footwear,
apparel, and equipment. Our reportable operating segments for the NIKE
Brand are: North America, Western Europe, Central & Eastern Europe,
Greater China, Japan, and Emerging Markets. Our NIKE Brand Direct to
Consumer operations are managed within each geographic segment.
United States Market
In fiscal 2012, sales in the United States including U.S. sales of our Other
Businesses accounted for approximately 42% of total revenues, compared to
43% in fiscal 2011 and 42% in fiscal 2010. Our Other Businesses were
primarily comprised of our affiliate brands; Cole Haan, Converse, Hurley and
Umbro; and NIKE Golf. We sell to thousands of retail accounts in the United
States, including a mix of footwear stores, sporting goods stores, athletic
specialty stores, department stores, skate, tennis and golf shops, and other
retail accounts. During fiscal 2012, our three largest customers accounted for
approximately 24% of sales in the United States.
We make substantial use of our “futures” ordering program, which allows
retailers to order five to six months in advance of delivery with the commitment
that their orders will be delivered within a set time period at a fixed price. In
fiscal 2012, 86% of our U.S. wholesale footwear shipments (excluding our
Other Businesses) were made under the futures program, compared to 87%
in fiscal 2011 and 89% in fiscal 2010. In fiscal 2012, 64% of our U.S.
wholesale apparel shipments (excluding our Other Businesses) were made
under the futures program, compared to 60% in fiscal 2011 and 62% in fiscal
2010.
We utilize NIKE sales offices to solicit sales in the United States as well as
independent sales representatives to sell specialty products for golf,
skateboarding and snowboarding products. In addition, our Direct to
Consumer operations sell NIKE Brand products through our internet website,
www.nikestore.com, and the following in-line and factory retail outlets in the
United States:
U.S. Retail Stores Number
NIKE factory stores 156
NIKE in-line stores, including NIKETOWNs and employee-only stores 28
Cole Haan stores (including factory stores) 109
Converse stores (including factory stores) 62
Hurley stores (including factory and employee stores) 29
TOTAL 384
NIKE’s three significant distribution centers in the United States for NIKE
Brand products, including NIKE Golf, are located in Memphis, Tennessee.
NIKE also operates and leases one facility in Memphis, Tennessee for NIKE
Brand product returns. NIKE Brand apparel and equipment products are also
shipped from our Foothill Ranch, California distribution center. Cole Haan
products are distributed primarily from Greenland, New Hampshire, and
Converse and Hurley products are shipped primarily from Ontario, California.
International Markets
In fiscal 2012, non-U.S. sales (including non-U.S. sales of our Other
Businesses) accounted for 58% of total revenues, compared to 57% in fiscal
2011 and 58% in fiscal 2010. We sell our products to retail accounts, through
our own Direct to Consumer operations, and through a mix of independent
distributors, licensees and sales representatives around the world. We sell to
thousands of retail accounts and operate 16 distribution centers outside of
the United States. In many countries and regions, including Canada, Asia,
some Latin American countries, and Europe, we have a futures ordering
program for retailers similar to the United States futures program described
above. During fiscal 2012, NIKE’s three largest customers outside of the U.S.
accounted for approximately 11% of total non-U.S. sales.
Our Direct to Consumer business operates the following in-line and factory retail outlets outside the United States:
Non-U.S. Retail Stores Number
NIKE factory stores 308
NIKE in-line stores, including NIKETOWNs and employee-only stores 65
Cole Haan stores (including factory stores) 69
TOTAL 442
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