North America Is Nike’s Most Significant Growth Driver



North America sales trends

North America is Nike’s (NKE) largest segment and biggest contributor to profits. The segment saw the highest growth in absolute terms in fiscal 2Q16. Reported sales grew by $306 million, or 9.4% YoY (year-over-year), to $3.5 billion in the quarter. North America accounted for 46% of sales and 65.8% of Nike’s pre-tax income in 2Q16.

Athletic footwear and apparel sales in Nike’s North America segment grew by 12.3% and 8%, respectively, in fiscal 2Q16. Converse’s performance was also strong though the segment reported a global sales decline due to weak performance in Europe.

Consumer demand for athletic footwear and apparel stayed high in the quarter, boosted by higher employment and incomes in the US, low gas prices, and a consumer shift toward fitness gear and “athleisurewear” apparel.

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These trends have boosted US results for Nike peers Lululemon Athletica (LULU) and VF Corporation (VFC) as well. US sales rose 19.5% YoY to $1.3 billion for Lululemon Athletica in fiscal 2015, which ended February 1, 2015. VFC’s 2014 US sales increased 6.9% YoY to $7.6 billion in 2014. Faster category growth has also helped companies like The Gap (GPS), Tory Burch, and L Brands (LB) to enter the activewear space.

North America performance drivers [1. Based on comments by Trevor Edwards, President of NIKE Brand, and Andy Campion, CFO of Nike]

  • Nike experienced double-digit growth in its top line across several major categories including Jordan, Sportswear, Running, and Men’s Training.
  • Nike introduced several product innovations  including Tech Pack, Aeroloft, and Flyknit.
  • Sales growth trends were strong in both the wholesale and direct-to-consumer (or DTC) channels.


Nike reported futures orders growth of 14% in North America over the period December 2015 through April 2016. However, the company did mention that surplus inventory persisted in the system, which could be cleared in 2H16 through the company’s network of factory stores. Excess inventory in North America stemmed from the fallout from the West Coast ports impasse in early 2015, which affected the unloading of shipments due to the partial ports shutdown. This could lead to margin pressures in 2H16[1. Based on comments by Andy Campion, CFO of Nike].

Nike makes up 0.85% of the holdings in the iShares Russell 1000 Growth ETF (IWF). Consumer discretionary sector firms have a combined weight of 21.6% in the IWF ETF.


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