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Nike Inc’s marketing-related expenses drop 18%, revenue stagnant for Q1 2018

Nike Inc has experienced a 0% change in revenue for its first quarter of 2018, which ended ended 31 August 2017. Revenues stood at US$9.1 billion.

The company’s demand creation expense, which comprises advertising, endorsements and events, fell 18% from US$1,041 million in Q1 2016 to US$855 million during the same period this year, reflecting higher prior year investments in key sports events.

The revenues for the Nike brand alone increased by 2% to US$8.6 billion, driven by growth in Greater China, Asia Pacific and Latin America (APLA), and Europe, Middle East and Africa (EMEA). Meanwhile, revenues for the Converse brand dropped 16% to US$483 million, mainly due to declines in North America.

Greater China experienced a 6% increase in earnings from US$371 million in Q1 2016 to US$394 million in Q1 2017 and APLA saw a 24% jump in revenue for the Nike brand to US$260 million, as compared to US$209 million during the same period last year.

Marketing has reached out to Nike for comment.

According to Mark Parker, chairman, president and CEO, Nike, Inc., the company captured near-term opportunities through its new Consumer Direct Offense in Q1 2017. This is a new company alignment created to simplify the Nike brand’s geography structure from six to four – North America, EMEA, Greater China and APLA.

Operating overhead expense increased 8% to US$2.0 billion, driven by realignment costs associated with a workforce reduction in June and continued investments in Nike Direct, an initiative that unites Nike.com, direct-to-consumer retail and Nike+ digital products to boost direct connections with consumers and shape the future of retail. The company announced earlier this year that it will cut 2% of its global workforce, resulting in approximately 1,400 employees expecting to lose their jobs.

Meanwhile, it also jumped on the e-commerce bandwagon by launching a pilot programme with rival retailer Amazon. On a call with analysts and investors when reporting its Q4 2016 earnings, Nike’s management team said the retailer will directly sell a limited product assortment on Amazon’s US e-commerce platform, including athletic footwear, apparel and accessories. Parker said Nike hopes to “improve the Nike consumer experience on Amazon”, adding that the company is still in the early stages of this partnership and will continue to evaluate sales results.

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