How Does Nike Make Money? Business Model Explained!

Known for its athletic footwear and apparel, Nike Inc. (NKE) designs, develops, markets, and sells these products around the world. Despite being primarily designed for athletic purposes, its products are often used for casual or leisure activities as well. Independent contractors produce and sell most Nike products, which are distributed through Nike retail outlets and digital platforms, as well as independent distributors, licensees, and sales representatives.

Adidas AG (ADDYY), ASICS Corp. (7936), Lululemon Athletica Inc. (LULU), Puma SE (PUMSY), and Under Armour Inc. (UAA) are some of Nike’s major rivals.

Overview of Nike’s Financials

Nike reported financial results for Q3 of its fiscal year 2022, which ended Feb. 28, 2022. In the year-ago quarter, the company earned $1.4 billion, a decrease of 3.7%. The company’s revenue rose 5.0% year over year (YOY) to $10.9 billion. EBIT, a profitability metric Nike uses for each business segment, rose 1.4% YOY to $1.7 billion.

The COVID-19 pandemic and its impact continue to affect global supply chains and impact Nike’s global business results and operations, Nike said in its financial statement filings for the quarter. 

As a result of a resurgence in Coronavirus cases in Greater China, the company continues to experience an increase in temporary store closures. In addition, long inventory transit times continue to affect the company’s products, which are caused by port congestions, transportation delays, and labor and container shortages.

How Nike Makes Money

The Nike company categorizes its financial metrics into three categories: NIKE Brand; Converse; and Corporate. NIKE Brands are also segmented by geography: North America, Europe, Middle East & Africa; Greater China; Asia Pacific & Latin America; and Global Brand Divisions. 95% of Nike’s total revenue comes from its NIKE Brand segment.

As for Nike’s major product lines and distribution channels, the company breaks out revenue, but not profits. As an example, Nike’s product lines generated revenue of 66%, 30%, 4%, and other, respectively, in Q3 FY 2022. 

In the Other segment, which includes revenue from the licensing businesses of Global Brand Divisions and Converse, and foreign currency hedge gains and losses, a negligible portion is accounted for.

For each of its business segments, Nike reports both revenue and EBIT. Negative revenue and EBIT amounts are excluded from the pie charts above, as well as from the calculation of share percentages in the breakdowns below.

NIKE Brand: North America

In Q3 FY 2022, Nike’s North America segment generated revenues of $3.9 billion, accounting for about 36% of total revenue. The EBIT was $967 million, accounting for about 31% of the total. As compared to the year-ago quarter, revenue was up 8.9% but EBIT was down 0.3%.

NIKE Brand: Europe, Middle East, and Africa

About 26% of Nike’s total revenue during Q3 FY 2022 came from the Europe, Middle East & Africa segment. Revenue was $713 million. EBITDA was about 23%. EBIT rose 33.8% and revenue rose 6.5% for the quarter.

NIKE Brand: Greater China

In Q3 FY 2022, Nike’s Greater China segment generated $2.2 billion in revenue, about 20% of total revenues. Approximately 25% of the total was accounted for by EBITDA, which totaled $784 million. In comparison with the same three-month period a year ago, revenue was down 5.2% and EBIT was down 19.4%.

NIKE Brand: Asia Pacific and Latin America

During Q3 FY 2022, Nike’s Asia Pacific & Latin America segment generated $1.5 billion in revenue, or 13% of total revenue. Net income was $478 million, about 15%. Neither revenue nor EBIT grew by more than 10%.

NIKE Brand: Global Brand Divisions

NIKE’s Global Brand Division segment revenue is derived from NIKE Brand’s licensing businesses, demand creation and operating overhead expenses, as well as costs associated with its global digital operations and enterprise technologies. Despite making up a small portion of total revenue, the division generated $41 million in revenue in Q3 FY 2022. While revenue nearly sevenfolded, the segment lost $975 million before interest and taxes.


Converse, Chuck Taylor, All-Star, One Star, Star Chevron, and Jack Purcell are trademarks of Nike’s Converse business segment. During Q3 FY 2022, the segment had revenues of $567 million, or about 5% of the total revenue. It reported $168 million in EBIT, about 5% of total revenue. In comparison to the year-ago quarter, revenue decreased 0.5% and EBIT increased 12.0%.


Corporate segment revenues are primarily related to foreign currency hedge gains and losses generated by Nike’s other operating segments. In Q3 FY 2022, segment revenue declined from $14 million to -$19 million, a significant drop. Losses before interest and taxes were $412 million.

Additionally, Nike breaks down revenue breakdowns by distribution channels: wholesale sales (55%); direct sales (i.e. NIKE Direct) (44%); and a negligible percentage from the rest. Direct-to-consumer revenue increased 15.9% YOY in Q3 FY 2022, while wholesale revenues declined 2.4%.

Recent Developments

Nike announced on Jan. 19, 2022, that it would improve its supply chain in order to better serve its customers. Prior to winter 2020, the company said its North American business operated almost exclusively through its Memphis, TN distribution center. 

Nike also announced that it would be converting those distribution centers into omnichannel facilities and building new distribution centers in Los Angeles, Bethlehem, and Dallas. The company also opened a regional service center in Madrid to complement its European logistics center in Belgium. 

Nike also said it would be utilizing new technology, including machine learning and artificial intelligence, to improve efficiency at its distribution centers. In addition, Nike announced several initiatives aimed at improving its supply chain.

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