Mar 23, 2015
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How Nike has adapted to exchange rate fluctuations

Mar 23, 2015

The rise of the dollar against almost all of the world’s major currencies is currently posing a series of problems to large, international companies.

Nike, the world leader in sports, is not immune to the problem, despite recording 7% growth at constant exchange rates, attaining 7.46 billion dollars in turnover for its quarter ending in late February. 

The new Air Max 0 - Nike

For its 2016 financial year beginning in June, the US giant expects that the rising dollar will reduce its sales, gross margin and profits. Nike CFO Don Blair believes that if rates remain unchanged, sales growth should be limited to around 5%. 

Asked about the impact of the situation on production costs during a conference with analysts, Blair referred to mechanisms put in place that are intended to soften the impact of significant exchange rate fluctuations. 

"One of the things that we did four or five years ago is to start deconstructing our payments to the factories into a basket of currencies as opposed to one currency, which lets us get natural offsets to some of the currency exposure. The second thing is that we adjusted or we do adjust payments to the factories on the basis of how those currencies move. So that helps us also net down our foreign exchange exposure."

Nike also took the opportunity to express its desire, which it has already elaborated upon, to bring its production and consumer markets closer together through new strategies.

In terms of sales, management is careful not to announce a sudden change in prices in the markets, such as in Europe, where the effects of changes are unfavorable to the company. It has only said that they will "be adapted over the long term." The company will also continue to apply an upmarket strategy to place the brand in a premium niche. The price increases, which have already been underway for the past several seasons, will continue de facto.

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