NIKE, Inc. (NKE): history, ownership, mission, how it works & makes money

A Brief History of NIKE, Inc.

NIKE, Inc., founded in 1964 as Blue Ribbon Sports, officially became NIKE, Inc. in 1971. The company's name is derived from the Greek goddess of victory, and it has grown to become a global leader in sports apparel and footwear. As of 2024, NIKE operates in over 190 countries, with a diverse product portfolio that includes footwear, apparel, and equipment for a wide range of sports and lifestyle activities.

Financial Performance Overview

For the first quarter of fiscal 2025, which ended August 31, 2024, NIKE reported total revenues of $11.589 billion, a decrease of 10% compared to $12.939 billion in the same period of fiscal 2024. The decline was primarily driven by lower revenues across key markets, including North America and Europe.

Profitability Metrics

NIKE's gross profit for Q1 FY2025 was $5.257 billion, representing a gross margin of 45.4%, compared to $5.720 billion and a margin of 44.2% in Q1 FY2024. This improvement in margin was attributed to lower product costs and decreased warehousing expenses.

Operating Expenses

Total selling and administrative expenses decreased by 2% to $4.048 billion. This includes:

• Demand creation expense: Increased by 15% to $1.226 billion
• Operating overhead expense: Decreased by 7% to $2.822 billion

Net Income and Earnings Per Share

NIKE reported net income of $1.051 billion for Q1 FY2025, down from $1.450 billion in Q1 FY2024. The diluted earnings per share for the quarter were $0.70, compared to $0.94 in the prior year.

Cash Flow Analysis

For the first three months of fiscal 2025, NIKE generated an operating cash inflow of $394 million, compared to an outflow of $66 million in the same period last year. Cash used in investing activities was an outflow of $166 million.

Share Repurchase Program

During the quarter, NIKE repurchased approximately 14.8 million shares at an average price of $80.60, totaling $1.193 billion. As of August 31, 2024, NIKE had repurchased a total of 99.7 million shares under its current $18 billion share repurchase program.

Capital Resources

As of August 31, 2024, NIKE’s total long-term debt was approximately $7.932 billion. The company maintains a strong liquidity position with $8.485 billion in cash and equivalents at the end of the quarter.

Market Position and Future Outlook

NIKE continues to focus on digital transformation and sustainability initiatives to drive future growth. The company aims to leverage its brand strength and global reach to navigate challenges in the retail environment and enhance shareholder value.

A Who Owns NIKE, Inc. (NKE)

Major Shareholders

As of 2024, the primary ownership of NIKE, Inc. is distributed among a mix of institutional investors and individual shareholders. The largest stakeholders include:

Class Structure of Shares

NIKE, Inc. has two classes of common stock: Class A and Class B. The Class B shares are the only ones publicly traded. The ownership structure is as follows:

Shareholder Rights and Voting

Class B shareholders have enhanced voting rights compared to Class A shareholders. This structure allows key figures, such as Phil Knight, to maintain significant control over the company's strategic direction despite not holding the majority of shares.

Recent Stock Performance

As of August 31, 2024, NIKE, Inc. reported a total revenue of $11.6 billion for the first quarter of fiscal 2025, reflecting a decrease from $12.9 billion in the same period of the previous year. The company's stock performance has been impacted by various market conditions, including consumer spending trends and competitive pressures.

Share Repurchase Activity

In the first quarter of fiscal 2025, NIKE repurchased a total of 14.8 million shares of its Class B common stock for approximately $1.2 billion as part of its ongoing share repurchase program. The average price paid per share during this period was $80.60.

Dividend Information

NIKE, Inc. declared dividends totaling $554 million during the first quarter of fiscal 2025, reflecting its commitment to returning value to shareholders.

Conclusion on Ownership Trends

With a diversified ownership base comprising institutional investors and significant individual shareholders, NIKE, Inc. continues to navigate the complexities of the market while maintaining a robust structure for shareholder engagement and value creation.

NIKE, Inc. (NKE) Mission Statement

Mission Statement Overview

NIKE, Inc. aims to bring inspiration and innovation to every athlete in the world. The company defines an athlete as anyone with a body, promoting inclusivity in its mission. This mission is supported by its commitment to sustainability and community engagement.

Financial Performance Metrics

As of the first quarter of fiscal 2025, NIKE, Inc. reported total revenues of $11.589 billion, reflecting a decrease of 10% from $12.939 billion in the same period of the previous year. The breakdown of revenues by segment is as follows:

Revenue Sources

NIKE Brand revenues accounted for over 90% of total revenues, with the breakdown by category as follows:

Gross Margin and Profitability

For the first quarter of fiscal 2025, NIKE reported a gross profit of $5,257 million, resulting in a gross margin of 45.4%, which represents an increase of 120 basis points compared to the previous year. The following details encapsulate the profitability metrics:

Investment in Demand Creation

NIKE's demand creation expenses, which include marketing and promotional costs, amounted to $1,226 million in Q1 FY 2025, a 15% increase from $1,069 million in the previous year. This investment reflects the company’s emphasis on brand marketing and engagement in key sports events.

Shareholder Returns

In the first quarter of fiscal 2025, NIKE returned approximately $1.8 billion to shareholders through share repurchases and dividends. The details of share repurchase activities are as follows:

Conclusion

NIKE, Inc. continues to focus on its mission of inspiration and innovation while navigating challenges in revenue growth and profitability. The company’s strategic investments in demand creation and shareholder returns underscore its commitment to long-term value creation.

How NIKE, Inc. (NKE) Works

Business Overview

NIKE, Inc. operates as a global supplier of athletic footwear, apparel, equipment, and accessories. The company is divided into several geographical segments, including North America, Europe, Middle East & Africa (EMEA), Greater China, and Asia Pacific & Latin America (APLA).

Financial Performance

For the first quarter of fiscal 2025, NIKE, Inc. reported total revenues of $11.589 billion, a decrease of 10% from $12.939 billion in the same quarter of fiscal 2024. The decrease in revenue was attributed primarily to declines in NIKE Brand and Converse revenues across various segments.

Revenue Breakdown

NIKE Brand revenues constituted over 90% of total revenues, with footwear, apparel, and equipment being key product categories. The following table summarizes the NIKE Brand revenues by category:

Margins and Expenses

The gross margin for the first quarter of fiscal 2025 was 45.4%, an improvement from 44.2% in the prior year. This increase was driven by lower product costs, particularly in ocean freight and warehousing logistics.

Total selling and administrative expenses were $4.048 billion, down 2% from $4.116 billion in the previous year. The breakdown of these expenses is as follows:

Net Income and Earnings Per Share

NIKE, Inc. reported a net income of $1,051 million for the first quarter of fiscal 2025, down 28% from $1,450 million in the previous year. The diluted earnings per share were $0.70, compared to $0.94 in the same period last year.

Cash Flow and Shareholder Returns

NIKE returned approximately $1.8 billion to shareholders in the first quarter of fiscal 2025 through share repurchases and dividends. Cash and equivalents at the end of the period stood at $8.485 billion.

Inventory Management

As of August 31, 2024, total inventories were reported at $8.253 billion, an increase of 10% compared to May 31, 2024. This increase was driven primarily by an increase in units available for sale.

Future Outlook

The company faces ongoing challenges related to consumer spending, product portfolio management, and foreign currency impacts, which may affect future revenue growth and profitability.

How NIKE, Inc. (NKE) Makes Money

Revenue Sources

NIKE, Inc. generates revenue primarily through the sale of athletic footwear, apparel, and equipment. For the first quarter of fiscal 2025, total revenues were reported at $11.589 billion, a decrease of 10% from $12.939 billion in the prior year. The breakdown of revenues is as follows:

Sales Channels

NIKE's sales are distributed through two main channels: wholesale and direct-to-consumer (DTC). In Q1 2025, the revenue from these channels was:

Geographic Performance

NIKE's revenues vary significantly by region. The following table summarizes revenue by geographic segment for Q1 2025:

Cost Structure

For the first quarter of fiscal 2025, NIKE reported a cost of sales amounting to $6.332 billion, which is a 12% decrease from $7.219 billion in the previous year. The gross profit was $5.257 billion, reflecting a gross margin of 45.4%.

Expenses

Operating expenses consist of demand creation expenses and operating overhead expenses. In Q1 2025, these expenses were:

Net Income and Earnings Before Interest and Taxes (EBIT)

NIKE's net income for Q1 2025 was $1.051 billion, a decrease of 28% compared to $1.450 billion in Q1 2024. The EBIT for the same period was $1.264 billion, reflecting a decrease of 22% from $1.614 billion in the prior year.

Financial Ratios

The EBIT margin for Q1 2025 was calculated at 10.9%, down from 12.5% in Q1 2024.

Cash Flow and Investments

Cash provided (used) by investing activities was an outflow of $166 million for the first three months of fiscal 2025. Cash provided (used) by financing activities was an outflow of $1.622 billion.

Conclusion

NIKE's revenue generation is heavily reliant on footwear and apparel sales through both wholesale and DTC channels. The company continues to adapt its operations in response to shifts in consumer demand and market conditions.