What has been the trend in Nike's revenues over recent quarters?
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.
What has been the trend in Nike's total expenses over recent quarters?
Total expenses is expected to increase on a sequential basis in Q4 2019, due to higher input costs, marketing expense and forex losses
% Change in Total Expenses (Y-o-Y)
% Change in Total Expenses (Q-o-Q)
What is driving change in Nike's expenses and profitability?
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
Net Income Margin
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
COGS as % of Revenue
Demand creation expense has been decreasing sequentially over recent quarters. However, on 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
Demand Creation Expense
Though the effective tax rate in 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, effective tax rate is expected to be lower than 2018, in the absence of one-time transition tax that was paid in 2018.
Effective Tax Rate
What is the outlook for Nike for FY 2020?
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 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 sluugish equipment sales and lower licensing revenues.
After a sharp rise expected in net income margin in 2019 (led by 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.
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