How Nike Makes Money

Nike North America is the company’s largest geographic segment

Reviewed by Margaret James

Nike Inc. (NKE) is a global footwear and apparel company that designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services. Although primarily designed for athletic use, many of its products are worn for casual or leisure activities. The majority of Nike’s products are manufactured by independent contractors and are sold either direct-to-consumers through Nike retail outlets and digital platforms, or through independent distributors, licensees, and sales representatives.

Nike, which is based in Oregon, has a large number of major global rivals, including Adidas AG (ADDYY), ASICS Corp. (7936), Lululemon Athletica Inc. (LULU), Puma SE (PUMSY), and Under Armour Inc. (UAA).

Key Takeaways

• Nike designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories.
• Nike’s business results and operations continue to be impacted by the pandemic and its effects on global supply chains.
• Most of Nike’s sales are generated by selling footwear to wholesale customers in North America.
• Nike announced in January that it was taking steps to improve its supply chains, including new distribution centers and using technology like AI and machine learning within its distribution centers.

Nike’s Financials

Nike announced in March financial results for Q3 of its 2024 fiscal year (FY), the three-month period ended Feb. 29, 2024. The company posted a net income of $1.2 billion, down 5% from the year-ago quarter. Revenue stayed flat year over year (YOY) with $12.4 billion. Earnings before interest and taxes (EBIT), a profitability metric Nike uses for its individual business segments, dropped 5% YOY to $1.4 billion.

Nike said in its financial statement filings for the quarter that the COVID-19 pandemic and its related impacts continue to affect global supply chains and create volatility in the company’s global business results and operations. In Greater China, the company continues to experience heightened levels of temporary store closures due to a resurgence of coronavirus cases. The availability of the company’s products also continue to be impacted by lengthy inventory transit times, which are due to port congestions, transportation delays, and labor and shipping container shortages.

Nike’s Business Segments

Nike breaks its financial metrics into three categories: NIKE Brand; Converse; and Corporate. The NIKE Brand also is further broken down into geographical segments: North America; Europe, Middle East & Africa; Greater China; Asia Pacific & Latin America; and Global Brand Divisions. The NIKE Brand segment comprises over 95% of the company’s total revenue.

Nike also breaks out revenue, but not profits, for its major product lines and distribution channels. The share of revenue generated by each of Nike’s product lines in Q3 FY 2024, for example, was: Footwear (68%); Apparel (28%); Equipment (4%); and Other. A negligible amount is attributable to Other, which includes revenue from licensing businesses of the Global Brand Divisions and Converse segments, and to foreign currency hedge gains and losses accounted for in the Corporate segment.

Nike reports both revenue and EBIT for its individual business segments. The data reported in the pie charts above and in the share percentage calculations in the breakdowns below exclude negative revenue and EBIT amounts.

NIKE Brand: North America

Nike’s North America segment posted $5.1 billion in revenue in Q3 FY 2024, comprising nearly 41% of total revenue. EBIT came in at $1.4 million, comprising about 99.7% of the total. The segment’s revenue grew 3.2% while EBIT grew 18% compared to the year-ago quarter.

NIKE Brand: Europe, Middle East, and Africa

Nike’s Europe, Middle East & Africa segment posted $3.1 billion in revenue during Q3 FY 2024, comprising about 25% of total revenue. EBIT was $734 million, about 52% of the total. Revenue and EBIT for the quarter dropped 3.3% and 6.5%, respectively.

NIKE Brand: Greater China

Nike’s Greater China segment posted $2.1 billion in revenue in Q3 FY 2024, about 17% of total revenue. EBIT was $722 million, comprising more than 50% of the total. Revenue and EBIT grew 4.5% and 2.8%, respectively, compared to the same three-month period a year ago.

NIKE Brand: Asia Pacific and Latin America

Nike’s Asia Pacific & Latin America segment posted $1.64 billion in revenue during Q3 FY 2024, about 13% of total revenue. EBIT was $471 million, about 33.5% of the total. Revenue rose 2.87% and EBIT dropped 3%.

NIKE Brand: Global Brand Divisions

Nike’s Global Brand Divisions segment revenue is attributable to NIKE Brand’s licensing businesses that are not part of any of the geographic segments, demand creation and operating overhead expense, and costs associated with its global digital operations and enterprise technology. The division posted $9 million in revenue in Q3 FY 2024, making up a small fraction of total revenue. The segment posted a $1.2 million loss before interest and taxes while revenue decreased 25%.

Converse

Nike’s Converse segment is engaged in the design, distribution, licensing, and sale of casual sneakers, apparel, and accessories under the following trademarks: Converse, Chuck Taylor, All-Star, One Star, Star Chevron, and Jack Purcell. The segment posted $495 million in revenue during Q3 FY 2024, comprising about 4% of the total. It reported $98 million in EBIT, about 7% of the total. Revenue and EBIT fell 20% and 40%, respectively, compared to the year-ago quarter.

Corporate

Nike’s Corporate segment revenue primarily consists of foreign currency hedge gains and losses related to revenues generated by Nike’s other operating segments. The segment posted revenue of -$14 million in Q3 FY 2024, a significant deterioration from revenue of $12 million in the year-ago quarter. The segment reported a loss before interest and taxes of $874 million.

Nike also breaks down the share of revenue from its distribution channels: Sales to Wholesale Customers (55%); Sales through Direct to Consumer (i.e. NIKE Direct) (44%); and a negligible amount from the rest. The Direct to Consumer distribution channel grew 1.5% YOY in Q3 FY 2024, while Wholesale Customers’ revenue declined 0.5% YOY.

Nike’s Recent Developments

On Jan. 19, 2022, Nike announced that it was making a number of changes to improve its supply chain in order to better serve customers. The company said that prior to winter 2020, North American business operated almost entirely through its distribution centers in Memphis, TN. Nike said that it would not only transform those distribution centers into omnichannel facilities, but was adding entirely new distribution centers in Los Angeles, CA, Bethlehem, PA, and Dallas, TX. The company also added a regional service center in Madrid to complement its European logistics center in Belgium. Nike also said it was using new technology, including AI and machine learning, to improve the efficiency at its distribution centers. The company announced several other initiatives to improve its supply chains.

How Nike Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Nike and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Nike releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Nike discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Nike breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

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