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Nike: How Is Its Near and Medium-Term Revenue Looking?

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Revenue expectations from Nike in fiscal 3Q16

Nike (NKE) is expected to post revenue of ~$8.2 billion in fiscal 3Q16, according to Wall Street analysts’ consensus estimate. That’s an implied increase of 9.8% over the same period of the previous year. While Nike hasn’t provided a dollar figure for revenue, the company has said it expects high-single-digit to low-double-digit sales growth in reported terms in fiscal 3Q16. In currency-neutral terms, sales growth is expected be in the mid-teens. In fiscal 2Q16, Nike reported future orders growth of 15% in reported terms and 20% in currency-neutral terms.

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Sales drivers

Revenue growth is likely to be driven by Nike’s North America and Greater China segments. Nike’s direct-to-consumer channel and footwear and women’s categories could also end up posting above-average growth. We’ll discuss the prospects for these segments in greater detail in the following articles.

Forex factors likely to impact Nike’s revenue growth

Despite strong demand trends, Nike’s sales growth is expected to come in slightly slower in fiscal 3Q16 due to its high exposure to overseas markets. Global brand Nike derived ~55% of its sales from outside North America in fiscal 2015, the highest exposure within its peer group, which includes VF Corporation (VFC), Under Armour, and Lululemon Athletica.

Medium-term outlook

Nike (NKE) is projecting its top line to grow to $50 billion by fiscal 2020, rising by ~63% over the $30.6 billion clocked in fiscal 2015. The fiscal year for Nike ends May 31. This implies sales growth at a CAGR (compound annual growth rate) of 10.3% between fiscal 2015 and fiscal 2020.

Nike’s sales have grown at a five-year CAGR of ~10%, compared with 31.7% for Lululemon Athletica (LULU), 30.1% for Under Armour (UA), 9.4% for Skechers (SKX), 9.4% for Columbia Sportswear (COLM), and 3.3% for Adidas (ADDYY). LULU and UA are newer companies. A high product demand coupled with a lower revenue base has resulted in exponential sales growth for these companies. NKE makes up 0.47% of the portfolio holdings in the SPDR S&P 500 ETF (SPY) and 3.2% of the holdings in the iShares MSCI USA Momentum Factor ETF (MTUM).

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