Nike 2013 Annual Report Download - page 5

PART I
Sales and Marketing
Financial information about geographic and segment operations appears in
Note 18 — Operating Segments and Related Information of the
accompanying Notes to the Consolidated Financial Statements.
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 extensive 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, equipment, accessories, and services. 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 2013, sales in the United States, including U.S. sales of our Other
Businesses, accounted for approximately 45% of total revenues, compared
to 42% in both fiscal 2012 and fiscal 2011. Converse and Hurley, our affiliate
brands, and NIKE Golf comprise our Other Businesses. 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 2013, our three
largest customers accounted for approximately 25% 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 2013, 87% of our U.S. wholesale footwear shipments (excluding our
Other Businesses) were made under the futures program, compared to 86%
in fiscal 2012 and 87% in fiscal 2011. In fiscal 2013, 67% of our U.S.
wholesale apparel shipments (excluding our Other Businesses) were made
under the futures program, compared to 64% in fiscal 2012 and 60% in fiscal
2011.
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. In addition, our Direct to Consumer
operations sell NIKE Brand products to consumers through our internet
website, www.nike.com, and through the following number of retail stores in
the United States:
U.S. Retail Stores Number
NIKE Brand factory stores 171
NIKE Brand in-line stores, including NIKETOWNs and employee-only stores 33
Converse stores (including factory stores) 72
Hurley stores (including factory and employee stores) 27
TOTAL 303
NIKE has five primary distribution centers in the United States located in
Memphis, Tennessee, three of which are leased. NIKE Brand apparel and
equipment products are also shipped from our Foothill Ranch, California
distribution center. Converse and Hurley products are shipped primarily from
Ontario, California.
International Markets
In fiscal 2013, non-U.S. sales including non-U.S. sales of our Other
Businesses accounted for 55% of total revenues, compared to 58% in both
fiscal 2012 and fiscal 2011. 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 ordering program
described above. During fiscal 2013, NIKE’s three largest customers outside
of the U.S. accounted for approximately 6% of total non-U.S. sales.
Our Direct to Consumer business operates the following number of retail stores outside the United States:
Non-U.S. Retail Stores Number
NIKE Brand factory stores 388
NIKE Brand in-line stores, including NIKETOWNs and employee-only stores 59
Converse stores (including factory stores) 3
TOTAL 450
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