Currency headwinds negatively impact Nike’s fiscal 1Q17 top line
Nike’s (NKE) management is expecting a high single-digit to low double-digit rate growth in the company’s top line on a currency-neutral basis in fiscal 2017. After including the currency effects, the top-line growth is likely to be trimmed to high single-digit rate growth, reflecting the impact of a stronger dollar, in particular against developing market currencies.
Currency headwinds are likely to be more severe in the first half of the year. This would result in slower growth, especially in the first quarter, which is expected to register a mid-single-digit growth.
Among Nike’s peers in the apparel industry, Ralph Lauren (RL), PVH Corp. (PVH), and Lululemon Athletica (LULU) have reported currency headwinds that subdued their top lines in the last couple of quarters.
A look at Nike’s futures orders
Nike (NKE) has reported strong futures orders across geographies. The Nike brand saw futures orders growing 11% on a neutral currency basis and 8% on a constant currency basis. On May 31, 2016, the company reported ~$15 million of futures orders, scheduled to be delivered between June–November 2016.
According to the futures orders trend, all geographies—except North America, Central Europe, and Eastern Europe—are likely to post double-digit growth on a constant currency basis. Japan and Greater China are the best performers, with reported futures orders growth of 15% and 24%, respectively.
Futures orders are the advance orders that Nike receives from its retailers for the delivery of apparel and footwear of the Nike Brand within a stipulated timeframe. These orders provide a good picture for the demand of Nike’s products in the near term.