How Is Nike Expected To Grow Over The Next One Year?

by Trefis Team
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Nike (NYSE: NKE) is set to release its Q4 and FY 2019 results on June 27, 2019, followed by a conference call with analysts.

Performance Expectations

  • Nike’s revenues have maintained healthy year-on-year growth through the recent quarters, through innovation and a focus on the direct-to-consumer business. Additionally, revenue growth was also influenced by strength in international and NIKE Direct businesses alongside momentum in North America.
  • Trefis estimates NKE’s revenues to increase by close to 7.5% to $39.1 billion in FY 2019. Revenue is expected to come close to $10 billion in Q4 2019, marking a y-o-y growth of 3.5% to 4.0%.
  • Higher revenue would likely be driven by growth across footwear and apparel, driven by innovative platforms.  Also, solid growth across sportswear, Jordan, NIKE Kids, and Running categories, along with rising brand value and international presence, is expected to drive revenue growth.
  • Earnings are expected to register a marginal decline in Q4 2019, mainly due to currency headwinds. However, for the full year, earnings are set to improve, led by higher revenues, favorable product-price mix, lower markdowns, and growth in direct channel sales, partially offset by higher input costs and foreign currency losses.

We have summarized the key expectations in our interactive dashboard – How is Nike expected to fare in Q4 and FY-2019 and what would it look like by the end of FY-2020? In addition, here is more  Consumer Discretionary Services data.

A Quick Look At NKE’s Revenue Streams

NKE reported total revenue of $36.4 billion in FY 2018. The key revenue segments are as follows:

  • Footwear: $22.3 billion in revenue in FY 2018 (contributed 61% of total revenues). The division is involved in the design, development, and marketing of footwear worldwide under the Nike brand.
  • Apparel: $10.7 billion in revenue in FY 2018 (contributed 29% of total revenues). The segment sells sports apparel and accessories in several sports categories, sports-inspired lifestyle apparel, and athletic bags under the Nike brand.
  • Equipment: $1.4 billion in revenue in FY 2018 (contributed 5% of total revenues). This segment includes sale of bags, socks, sport balls, eye wear, timepieces, electronic devices, bats, gloves, protective equipment, and other items.
  • Other Business: $2 billion in revenue in FY 2018 (contributed 5% of total revenue). This segment includes Converse Inc., which is Nike’s wholly-owned subsidiary that sells sports footwear and has built its reputation as America’s original sports company, and licensing revenues.

A] Revenue Trend


  • In spite of a drop in revenues in Q1 and Q2 2019 on a sequential basis, footwear revenue increased by double-digits on a y-o-y basis in recent quarters, led by growth across all categories, higher single-digit growth in unit sales, as well as average selling price (ASP) per pair.
  • Continued revenue growth in NKE Kids and running categories is expected to drive segment growth in FY 2019.


  • Apparel revenue has registered healthy growth over recent quarters, led by the Sportswear category.
  • Increased sales under Nike Direct also led to higher unit sales and higher ASP.
  • With increased focus on the direct channels, apparel growth is expected to continue over the next year.


  • Equipment revenue has been a drag for the company with segment revenue declining over the last two quarters.
  • Since most of its equipment is manufactured in China, the US-China trade tensions have adversely affected the category.
  • However, since it represents a small portion of total company revenues, it will have a minimal effect on top line growth.

Other Business

  • Other business revenues have faced a lot of volatility due to a sharp drop in Nike’s licensing revenues, partially offset by growth in Converse with demand in North America picking up.
  • Licensing revenue drop is expected to keep the segment revenue pressured in the near term.

B] Expense Trend

Total expenses are expected to increase on a sequential basis in Q4 2019, due to higher input costs, marketing expense, and forex losses.

  • Cost of Goods Sold (COGS): Cost of sales as a % of revenue has largely increased over recent quarters before dropping in Q3 2019. For the full year, cost of sales is expected to remain high due to increased input costs — including cotton, chemicals, and labor, and the shift in supply-chain investments from Q3 to Q4 2019.
  • Demand Creating Expense: Demand creation expense has been decreasing sequentially over recent quarters. However, on a y-o-y basis, the expense has increased to higher advertising and marketing expense. NKE’s focus on brand building and related expenses could lead to higher cost over the next year.
  • Effective Tax Rate: Though the effective tax rate in the first three quarters of 2019 was higher compared to Q4 2018, it was much lower compared to the first half of 2018. For full year 2019, the effective tax rate is expected to be lower than 2018, in the absence of one-time transition tax that was paid in 2018.

Net income margin is expected to improve further in Q4 2019, led by lower effective tax rate, higher gross margins, partially offset by currency headwinds.

Full Year Outlook

  • After a projected growth of 7.4% in FY 2019, Trefis estimates that Nike’s total revenues could grow by close to 7% to $41.8 billion in FY 2020.
  • Higher revenues are expected to be driven by a pickup in North American demand and higher international sales, increased focus on brand building and direct sales channels, higher unit sales and ASP in the sportswear – apparel and footwear category, partially offset by sluggish equipment sales and lower licensing revenues.
  • After a sharp rise expected in net income margin in 2019 (led by a lower effective tax rate), margins are expected to improve further to 11.4% in FY 2020, driven by favorable price mix and increasing share of digital sales.

Trefis has a price estimate of $89 per share for Nike’s stock.



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