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How Will the Higher US Dollar Affect Nike’s Top Line?

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Nike’s geographical performance

As we mentioned in the last part of this series, Nike (NKE) will report its fiscal 2015 and 4Q15 earnings on June 25. Consensus Wall Street analysts’ estimates project revenue of ~$30.6 billion and $7.8 billion for fiscal 2015 and 4Q15, respectively.

The impact of the appreciating US dollar is expected to hit 4Q15 sales more than the full-year revenue. Nike is projecting sales growth in the low double-digits in 4Q15 in constant-currency terms, with reported revenue coming in 8%–9% lower.

For full-year 2015, Nike is looking at constant currency revenue growth in the low teens, with reported growth coming in 4%–5% lower. Nike derived ~56% of its revenue from outside North America[2. US and Canada] in fiscal 2014.

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Reported sales

The appreciation of the US dollar over the past year is expected to hit the reported sales number. The US dollar trade-weighted index is up by 13% through the 12 months ending May 2015. Particularly, US dollar appreciation over the euro, the Japanese yen, the Russian ruble, and the Brazilian real will likely have the most impact on Nike’s sales.

Peer group performance

Also, due to Nike’s greater exposure overseas, the appreciation of the US dollar is expected to have a more significant impact on its top line—compared to other companies.

  • Lululemon Athletica (LULU) only derives ~30% of its revenue from outside the US
  • Under Armour (UA) derives ~10% of its revenue from outside the US
  • Skechers (SKX) derived about ~31% of its sales from overseas in 1Q15
  • VF Corporation (VFC) derived ~38% of its revenue from abroad in 2014, mostly from Europe

ETF exposure

Nike is part of the elite 30-stock Dow Jones Industrial Average. The SPDR Dow Jones Industrial Average ETF (DIA) has ~3.8% of its holdings invested in Nike. The iShares Core S&P 500 ETF (IVV) has 0.5% of its holdings invested in Nike.

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