Gross Margin for Nike (NKE)

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NKE » Topics » Gross Margin

This excerpt taken from the NKE 10-K filed Jul 27, 2009.

Gross Margin


	Fiscal 2009			Fiscal 2008			FY09 vs. FY08 % Change		Fiscal 2007			FY08 vs. FY07 % Change
	(In millions)
Gross Margin	$	8,604.4		$	8,387.4		3%		$	7,160.5		17%
Gross Margin %		44.9	%		45.0	%	(10 bps	)		43.9	%	110 bps

Fiscal 2009 Compared to Fiscal 2008

During fiscal 2009, the primary factors contributing to the 10 basis point decline in consolidated gross margin percentage versus the prior year were lower gross pricing margins and increased discounts which, when combined, decreased consolidated gross margins by approximately 60 basis points. This decrease was partially offset by improved hedge rates relative to the prior year, primarily in the Europe, Middle East and Africa (“EMEA”) Region. Gross pricing margins were lower, primarily driven by higher product input costs, most notably for footwear products. Higher levels of discounts were provided across all businesses in fiscal 2009 to manage inventory levels.

We anticipate our gross margins in fiscal 2010 will be negatively impacted by hedge rates that are unfavorable in comparison to the prior year.

Fiscal 2008 Compared to Fiscal 2007

During fiscal 2008, the primary factors contributing to the 110 basis point increase in the consolidated gross margin percentage versus the prior year included: higher footwear in-line gross pricing margins, most notably in the U.S. Region, primarily due to strategic price increases; improved currency hedge rates relative to the prior year, primarily in the EMEA Region; and higher footwear close-out net pricing margins, most notably in the EMEA Region, primarily due to better inventory management. The factors driving an increased gross margin percentage were partially offset by lower apparel in-line gross pricing margins primarily driven by higher product costs, most notably in the U.S. and EMEA regions, and increased apparel close-out sales, primarily in the U.S. Region.

This excerpt taken from the NKE 10-Q filed Apr 9, 2009.

Gross Margin


	Three Months Ended February 28 and 29,							Nine Months Ended February 28 and 29,
							%							%
	2009			2008			Change	2009			2008			Change
	(dollars in millions)
Gross margin	$	1,948.5		$	2,047.9		-5%	$	6,560.6		$	6,056.0		8%

Gross margin %		43.9	%		45.1	%	-120 bps		45.4	%		44.7	%	70 bps

For the third quarter of fiscal 2009, the primary factors contributing to the decrease in gross margins versus the prior year period were higher product costs; increased discounts, primarily on apparel, increased inventory obsolescence reserves, and higher warehousing costs, primarily in the U.S. and EMEA Region, partially offset by improved year-on-year hedge rates, most notably in the EMEA Region. For the year-to-date period, the increase in gross margins was primarily the result of improved year-on-year hedge rates, primarily in the EMEA Region, partially offset by higher warehousing costs in the U.S., increased discounts and higher inventory obsolescence reserves.

These excerpts taken from the NKE 10-K filed Jul 28, 2008.

Gross Margin


	Fiscal 2008			Fiscal 2007			FY08 vs. FY07 Change	Fiscal 2006			FY07 vs. FY06 Change
	(In millions)
Gross Margin	$	8,387.4		$	7,160.5		17%	$	6,587.0		9%
Gross Margin %		45.0	%		43.9	%	110 bps		44.0	%	(10)bps

Fiscal 2008 Compared to Fiscal 2007

During fiscal 2008, the primary factors contributing to the 110 basis point increase in the consolidated gross margin percentage versus the prior year were as follows:

(1)

Higher footwear in-line gross pricing margins, most notably in the U.S. Region, primarily due to strategic price increases;

(2)

Improved hedge rates relative to the prior year, primarily in the Europe, Middle East and Africa (“EMEA”) Region;

(3)

Higher footwear close-out net pricing margins, most notably in the EMEA Region, primarily due to better inventory management.

The factors driving an increased gross margin percentage were partially offset by lower apparel in-line gross pricing margins primarily driven by higher product costs, most notably in the U.S. and EMEA Regions, and increased apparel close-out sales, primarily in the U.S. Region.

Fiscal 2007 Compared to Fiscal 2006

During fiscal 2007, the primary factors contributing to the 10 basis point decrease in the consolidated gross margin percentage versus the prior year were as follows:

(1)

Lower footwear close-out net pricing margins in the U.S. and EMEA Regions, primarily due to sales discounts, combined with a higher close-out mix; partially offset by

(2)

Improved hedge rates relative to the prior year, primarily in the EMEA and Asia Pacific Regions;

(3)

Better inventory management, most notably in our Asia Pacific Region; and

(4)

Improved gross margins in our Other businesses, driven primarily by the growth in Converse’s international licensing business, partially offset by the expected effects of the transition in Exeter’s business from a licensing model to a wholesale model.

Gross Margin


	Fiscal 2008			Fiscal 2007			FY08 vs. FY07 SIZE="1">Change	Fiscal 2006			FY07 vs. FY06 SIZE="1">Change
	(In millions)
Gross Margin	$	8,387.4		$	7,160.5		17%	$	6,587.0		9%
Gross Margin %		45.0	%		43.9	%	110 bps		44.0	%	(10)bps

Fiscal 2008 Compared to Fiscal 2007

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">During fiscal 2008, the primary factors contributing to the 110 basis point increase in the consolidated gross margin percentage versus the prior year
were as follows:

(1)

Higher footwear in-line gross pricing margins, most notably in the U.S. Region, primarily due to strategic price increases;

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">

(2)

Improved hedge rates relative to the prior year, primarily in the Europe, Middle East and Africa (“EMEA”) Region;

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">

(3)

Higher footwear close-out net pricing margins, most notably in the EMEA Region, primarily due to better inventory management.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">The factors driving an increased gross margin percentage were partially offset by lower apparel in-line gross pricing margins primarily driven by higher
product costs, most notably in the U.S. and EMEA Regions, and increased apparel close-out sales, primarily in the U.S. Region.

Fiscal
2007 Compared to Fiscal 2006

During fiscal 2007, the primary factors contributing to the 10 basis point decrease in the consolidated
gross margin percentage versus the prior year were as follows:

(1)

Lower footwear close-out net pricing margins in the U.S. and EMEA Regions, primarily due to sales discounts, combined with a higher close-out mix; partially offset by

(2)

Improved hedge rates relative to the prior year, primarily in the EMEA and Asia Pacific Regions;

STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">

(3)

Better inventory management, most notably in our Asia Pacific Region; and

(4)

Improved gross margins in our Other businesses, driven primarily by the growth in Converse’s international licensing business, partially offset by the expected effects of the
transition in Exeter’s business from a licensing model to a wholesale model.

This excerpt taken from the NKE 10-K filed Jul 27, 2007.

Gross Margin


	Fiscal 2007			Fiscal 2006			FY07 vs. FY06 Change	Fiscal 2005			FY06 vs. FY05 Change
	(In millions)
Gross Margin	$	7,160.5		$	6,587.0		9%	$	6,115.4		8%
Gross Margin %		43.9	%		44.0	%	(10) bps		44.5	%	(50) bps

Fiscal 2007 Compared to Fiscal 2006

During fiscal 2007, the primary factors contributing to the 10 basis point decrease in gross margin percentage versus the prior year were as follows:

(1)

Lower footwear net pricing margins in the U.S. and Europe, Middle East and Africa (“EMEA”) Regions, primarily due to sales discounts, combined with a higher closeout mix; partially offset by

(2)

Favorable hedge results relative to the prior year, primarily in the Asia Pacific Region;

(3)

Better inventory management, most notably in our Asia Pacific Region; and

(4)

Fiscal 2006 Compared to Fiscal 2005

During fiscal 2006, our consolidated gross margin percentage declined 50 basis points versus the prior year. The primary factors contributing to the reduced gross margin percentage for fiscal 2006 were as follows:

(1)

Lower footwear in-line net pricing margins in the U.S., EMEA and Asia Pacific Regions. The lower footwear in-line net pricing margins were due to higher product costs, primarily the result of higher oil prices; additional costs incurred to meet strong footwear unit demand in the U.S.; higher sales incentives in EMEA and Asia Pacific; strategies to improve consumer value in EMEA and Japan; and a shift in the mix of footwear models sold towards models with lower margins within EMEA and Japan.

(2)

A shift in the mix of revenues reported from our operating segments towards regions and subsidiaries with lower margins.

The factors driving a reduced gross margin percentage were partially offset by:

(1)

Year-over-year currency hedge rate improvements, primarily for the euro.

(2)

Improved gross margin percentages in our Other businesses driven by improvements at Converse, Hurley and NIKE Golf.

This excerpt taken from the NKE 10-K filed Jul 28, 2006.

Gross Margin


	2006			2005			FY06 vs. FY05 Change		2004			FY05 vs. FY04 Change
	(In millions)
Gross Margin	$	6,587.0		$	6,115.4		8%		$	5,251.7		16%
Gross Margin %		44.0	%		44.5	%	(50	) bps		42.9	%	160 bps

Fiscal 2006 Compared to Fiscal 2005

(1)

Lower footwear in-line net pricing margins in the U.S., Europe, Middle East and Africa (“EMEA”) and Asia Pacific regions. The lower footwear in-line net pricing margins were due to higher product costs, primarily the result of higher oil prices; additional costs incurred to meet strong footwear unit demand in the U.S.; higher sales incentives in EMEA and Asia Pacific; strategies to improve consumer value in EMEA and Japan; and a shift in the mix of footwear models sold towards models with lower margins within EMEA and Japan.

(2)

A shift in the mix of revenues reported from our operating segments towards regions and subsidiaries with lower margins.

The factors driving a reduced gross margin percentage were partially offset by:

(1)

Year-over-year currency hedge rate improvements, primarily for the euro.

(2)

Improved gross margin percentages in our Other businesses driven by improvements at Converse, Hurley and NIKE Golf.

Fiscal 2005 Compared to Fiscal 2004

During fiscal 2005, our consolidated gross margin percentage improved 160 basis points versus the prior year. The primary factors contributing to the improved gross margin percentage for fiscal 2005 were as follows:

(1)

Higher gross margins in our international regions, driven primarily by our EMEA Region. This improvement was driven by changes in currency hedge rates, primarily the euro, partially offset by lower in-line net pricing margins and a higher percentage of less profitable closeout sales (non-current product offerings) in our EMEA and Asia Pacific regions. The lower in-line net pricing margins were due to strategies to improve consumer value. The increased levels of closeout sales and lower closeout pricing were the result of the liquidation of higher footwear and apparel closeout inventories in our EMEA and Asia Pacific regions.

(2)

Higher gross margins in the U.S. Region primarily due to fewer, more profitable closeouts in footwear partially offset by increased sales discounts and higher costs incurred to meet strong footwear unit demand.

(3)

Improved gross margin percentages in our Other businesses driven by the addition of Converse (acquired in the second quarter of fiscal 2004) and Exeter Brands Group (formed in the first quarter of fiscal 2005). Both Exeter Brands Group and the international portion of Converse’s business operate on a licensing model, which carries higher gross margins and lower operating expenses than the remainder of our Other businesses.

EXCERPTS ON THIS PAGE:

10-K	Jul 27, 2009

10-Q	Apr 9, 2009

10-K (2 sections)	Jul 28, 2008

10-K	Jul 27, 2007

10-K	Jul 28, 2006

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