2019 has proved to be a great year for Nike Inc. The company has generated the highest revenue in its history for the first time in fiscal 2019. Its net income has climbed past $4 billion for the second time in the last five fiscals. Last time, its net income was past $4 billion in 2017 and then declined by more than 50% in 2018. Again, its net income has risen past $4 billion in 2019 and reached $4.03 billion. Nike broke several more records in 2019 in terms of financial performance. Its quarterly net revenue rose past $10 billion in 2019 q4. For the first three quarters too, its net revenue remained higher than $9 billion. Nike’s performance was most consistent in the latest fiscal.
Nike (NASDAQ: NKE) is a well known sports shoe and apparel brand based in the United States. The company has its headquarters in Oregon, United States. It sells its products worldwide through both online and offline channels. Apart from the company owned retail stores, Nike also sells its products through independent distributors as well as licensees and sales repersentatives in almost all the countries around the world. United States is the largest market for Nike products. However, its share of revenue from the international markets has continued to grow over the last few years. The company has 384 brand retail stores operational in United States as of 2019 apart from 768 operational internationally.
Cost of sales
Selling and administrative expenses
Nike Distribution Centers in the United States:
The company has established six main distribution centers in the United States. Four of these distriution centers are located in Memphis, Tennessee. Nike owns two of these distribution centers and the rest two are leased properties. One more distribution center of Nike is located in Indianapolis, Indiana and one another in Dayton, Tennessee. Apart from the six main distribution centers, Nike also ships apparel and equipment form one another distribution center that is located at Foothill Ranch, California. This one is a leased facility and there are several more smaller distribution centers of Nike, all of which are leased and operated by third parties and located throughout the US in the various corners of the country.
Nike Brand Financial Performance in fiscal 2019 versus 2018
Apart from Nike brand products, the company also sells Hurley, Jordan, and Converse products. (However, here we are discussing Nike’s sales and revenue from Nike brand products only) Nike’s net revenue grew by 11% on a currency-neutral basis in 2019 compared to the previous year. It experienced revenue growth across all the geographic markets. Nike’s brand revenue from footwear and apparel grew 12% and 11% respectively in 2019. Revenue from Nike brand equipment on the other hand grew by 4%. Nike brand revenue grew across all footwear categories. While the sportswear category saw the highest growth in revenue of all the footwear categories, the Jordan Brand and running categories also experienced growth though less than the sportswear category. While the unit sales of footwear grew by 8%, higher average selling price per pair drove growth of around 4% in Nike’s revenue from footwear. Footwear accounted for around 65% of the company’s net revenue in 2019.
Nike’s revenue from Nike brand apparel grew 8% and 11% on a currency-neutral basis. The company experienced revenue growth across all the Nike brand apparel categories. Nike experienced a 6% growth in the sales of Nike brand apparel. Due to the higher average selling price per unit, the revenue of the brand from apparel sales grew by around 5%.
Nike revenue from Direct sales grew to 32% of the total sales of the brand compared to 30% during the previous year. Ecommerce sales in 2019 reached $3.8 billion compared to $2.8 billion in 2018. Several factors drove the growth in revenue from Nike Direct which grew 16% on a currency-neutral basis. Ecommerce sales of Nike grew 35% driving much of the growth in revenue from Nike Direct. Apart from that growth in comparable-store sales as well as growth in the number of stores also drove revenue growth across Nike Direct.
Nike’s revenue from men’s and women’s products grew 10% and 11% respectively on a currency-neutral basis in 2019 compared to the previous year. Nike experienced growth across nearly all product categories for men and women and the highest across the sportswear category. Several factors drove Nike’s revenue growth across women’s product categories including Nike’s focus on creating more compelling designs, creating marketing campaigns focused on the female audiences worldwide as well as a shift towards a digital distribution strategy led by digital channels. Nike also experienced growth across its Kids product categories except for football products for kids. Wholesale revenue was 68% of Nike’s consolidated net revenue whereas revenue from Nike Direct was 32% on a currency-neutral basis.
The geographic region accounting for the highest part of the company’s net revenue is North America. In 2019, it accounted for 43% of the company’s revenue, followed by Europe, Middle East, and Africa at 26% as well as the Asia Pacific and Latin America at 14%. Greater China accounted for 17% of the net revenue of the brand in 2019.
North America revenue of Nike grew 7% in 2019 compared to the previous year. 2019 revenue of Nike from the North American region was $15.9 billion compared to $14.9 billion in 2018. Revenue from Europe, Middle East, and Africa grew to $9.8 billion in 2019 compared to $9.2 billion in 2018. The revenue of Nike from Greater China reached $6.2 billion in 2019 from $5.1 billion in 2018.
Nike’s marketing expenses in 2020 reduced by 4% as compared to the previous fiscal. Its marketing expenses for fiscal 2020 were $3.6 billion as compared to $3.75 billion in fiscal 2019.
Marketing expenses of Nike Inc (also called demand creation expenses) grew by 5% in 2019 compared to the previous fiscal. The company spent $3.75 billion on marketing in 2019 compared to $3.57 billion in 2018.
Marketing expenses of Nike Inc grew to $3.6 billion in 2018 from $3.34 billion in 2017.
Volkswagen owns 12 brands. Its business consists of two main divisions including Automotive and financial services divisions. The automotive division is made up of three segments including Passenger cars, commercial vehicles and power engineering. This division of Volkswagen makes and sells passenger cars, light commercial vehicles, trucks, buses and motorcycles, as well as genuine parts, large-bore diesel engines, turbomachinery, special gear units, propulsion components and testing systems. The Ducati brand operates under the Audi brand and falls under the Passenger Cars Business Area.
The company made around 11 million vehicles in 2018 and sold 10.9 million units. Vehicle sales grew by around 1.1% in 2018 compared to the previous year. Sales revenue grew by 2.7% in 2018 against the previous year.
Research & Development : –
Volkswagen is an innovative brand. The company invests a large sum every year in research and development. Competition in the automobiles industry is very high and to retain its market leading position, the company places heavy focus on innovation. Research and development expenses of Volkswagen in 2018 grew to $13.6 billion against $13.14 billion in 2017. The company is planning to invest € 30 billion in electrical driving over the next five years. It also plans to expand its portfolio of electric cars to 50 models by 2025.
Financial Strength : –
Despite the challenging situation, financial performance of Volkswagen has improved every year. Revenue of the brand grew to €235.85 billion in 2018 from €229.55 billion in 2017. Operating profit of Volkswagen climbed to €17.1 billion in 2018. Gross Profit was €46.35 billion in 2018, rising from €43.55 billion in 2017.
Customer base : –
Volkswagen has a large portfolio of several brands that target various customer segments. It offers a large product range including competitively priced passenger cars, luxury cars, SUVs and trucks. The company has a large customer base from several countries all over the world. It has operations across more than 150 countries. A large customer base offers some major advantages like superior sales and more consistent financial performance. In 2018, the global car market share of Volkswagen rose to 12.3%.
International presence : –
Volkswagen has a large international business empire that spans 153 countries. The Volkswagen Group operates 122 production plants in 20 European countries and 11 more countries in the Americas, Asia and Africa.
Weakened Image : –
Brand image is an important strength in the automobile business. VW’s brand image was hurt by the recent Diesel scandal. The company has been able to manage the issue successfully to a large extent in the following years. However, the effect was still severe on its financial performance and business operations. Excluding the heavy financial loss it incurred, the brand was forced to make strategic changes across entire operations to strengthen its image.
Growth in the prices of raw material, labor and other things is causing an increase in operating expenses. Year by year, the operating expenses of Volkswagen have kept growing. Total cost of sales of VW in 2018 were €189.5 billion Euros compared to €186 billion Euros in 2017.
AI and Emerging Technologies : –
The emerging technologies including AI, digital technoilogy and autonomous driving have brought new opportunities for the automobile brands. VW is working to transform its core business portfolio. One of its central focuses is developing self-driving system for autonomous vehicles and artificial intelligence. Investing in AI and other emerging technologies will also help the brand grow its competitive advantage.
Marketing and Customer Engagement : –
Digital technology has brought excellent marketing and customer engagement opportunities for automobile brands. Using the technology to form stronger relationships with customers will help create a stronger image and retain more customers.
Social media, blogs and company websites can be great channels for customer and employee engagement. VW is using some of them. However, it must use both content and video marketing in plenty to attract and engage customers on various issues including environment, sustainability and electric mobility.
The company can grow through partnerships. It has several strategic partnerships in place already. Its partnership with Microsoft has helped it grow fast into a mobility service provider. The company has also entered several more strategic partnerships to grow its business empire in Europe, China and U.S. Sinotruck is a strategic partner of VW group in China. Partnering with the technology companies in the field of research and development is also helping VW achieve faster growth. The company is looking forward to entering more such strategic partnerships in regional markets to achieve revenue growth and market expansion.
Regulatory Pressure :-
Regulatory pressure in the automobile industry has kept growing over the past several years. Companies are under more pressure than ever due to higher regulation. Taxes and tariffs are also affecting the bottom line. The diesel scandal gave a severe blow to its cash flow. Regulatory pressures are adding to the compliance costs. The company lost around €25 billion in the diesel emissions case. International expansion is also being difficult due to higher regulatory pressure.
Intense Competition :-
The automotive industry has seen growth in demand over the recent years. This has led to higher sales but competition is also more intense now. There are many competitors of Volkswagen Group in the international automobile industry. Several of these are major international players. VW spends a lot on research and development and management of its international operations to retain its competitive edge. Competition also adds to the operating expenses and each player invests enormous sums in marketing and innovation.
Currency Fluctuations :-
Currency exchange rate fluctuations and changes in the economic environment of the regional markets can have a negative effect on the profitability of VW. In 2018, currency fluctuations had a negative impact on the profits of several of its brands including Skoda in 2018. Skoda’s operating profits fell by 14.6% in 2018 compared to the previous year. This was caused partly by fluctuation in currency exchange rates among other factors like growing personnel expenses.
A brief look at the business & revenue model of Starbucks.
Revenue Model of Starbucks
Starbucks is the leading coffee brand of the world with 27,339 stores operational worldwide in 2018. The company has its headquarters in Seattle and operates its global business through a large and international network of licensed and company operated stores. Starbucks has achieved superior growth and market leading position through consistent focus upon quality and customer experience. In the recent years, its number of stores as well as total net revenues have grown faster. The largest market of Starbucks are the Americas and specifically United States. The company has achieved its market leading position without aggressively spending on marketing. Instead it focused on superior customer experience and quality so as to build a strong reputation. The brand runs its network of stores globally through both company operated and licensed stores. Take a look at how it generates its revenue and the proportion of revenue it generates from each segment. .
While Coffee beverages are the core product offering of starbucks, they are not the only product category Starbucks offers. The company also offers other products. These products are divided into four main categories that include beverages, food, packaged and single serve coffees and teas and others. The largest of these categories is the beverages category. Beverages accounted for around 14.5 Billions of the entire revenue of the brand. Food is the second largest category of products accounting for more than 17% of the brand’s earnings in 2018.
Geographical Business Segments:-
US is the largest and primary market of Starbucks. However, the company has divided its business into three major geographical segments that include the Americas, EMEA (Europe, Middle East & Africa) and CAP (China/Asia Pacific). Americas are the largest of these three with the highest number of stores in 2018. They also account for the largest part of the brand’s revenue. The domestic market of Starbucks accounted for around 70% of its revenue in 2018. Americas overall accounted for around 16.7 Billion dollars of 24.7 Billion dollars that Starbucks generated in revenue in 2018. CAP was the second largest source of revenue accounting for around 4.5 Billion dollars in revenue. EMEA generated a little over 1 Billion US dollars in revenue.
Global Store Network:-
Starbucks has a global network of coffee stores that include both company operated and licensed stores. The highest number of these stores are in US. US is also the main market of Starbucks. The number of company operated stores in 2018 was 15,341 whereas that of the licensed stores was 13,983. The company operated stores have always accounted for the larger part of the brand’s revenue. In 2018 they generated around 19.7 Billion dollars in revenue for the brand whereas the licensed stores generated 2.7 Billion dollars in revenues.
Sources of Revenue:-
Starbucks has mainly three sources of revenue that include its company operated stores, earnings from the licensed stores, and other revenues from its channel development segment. The company operated stores are the main source of revenue for the brand. They account for the largest part of its revenue. In 2018, the company operated stores accounted for around 80% of the company’s revenue. On the other hand, revenues from the licensed stores accounted for around 11% of the total revenue of the company. Compared to the company operated stores, the licensed stores generally have lower gross margins and higher operating margins. In the licensed operating model, the company receives a small share of the revenues. However, the costs for running the licensed stores are also primarily born by the licensees. The company sells coffee, tea, food and related products to licensees for resale to its customers and receives royalties and license fees from the licensees. Apart from these, the company also sells certain equipment like coffee brewers and espresso machines to its licensees for use in their operations. The company also generates revenues from sales of packaged coffee, tea and ready-to-drink beverages to customers outside of its company-operated and licensed stores. These revenues are primarily included under the other revenues.
2018 Financial Performance:-
The financial performance of Starbucks has improved impressively in the past five years. From 16.5 Billion dollars in 2014, the net revenues of the company have grown to 24.7 Billion dollars in 2018. The company operated stores generate the most significant part of its revenue every year. Total revenue of the brand from the company operated stores in 2018 was 19.7 Billion dollars. In the same period the revenue of the brand from the licensed stores was 2.7 Billion dollars. Compared to 2017, total revenues of Starbucks saw 10% growth. Comparable store sales of Starbucks grew 2% driven by a 3% growth in the average ticket. Americas are the largest geographical market of Starbucks which generated 16.7 Billion dollars in sales. This was 7% higher than the previous year.
Tesla is an innovative automobile firm which makes electrical cars and power products. The company makes and sells premium electric sedans and SUVs . The core market of Tesla Motors is the United States. However, the company is also growing its footprint in China, the leading automobile market of the world. Tesla’s business model is different from the other car brands. Its core focus is innovation to create environment friendly products.
Tesla cars have grown fast in popularity and its sedan sales rose sharply in 2019. Despite continuing losses for several years, the company has not let its focus upon quality and technological innovation waver. It has a large number of patents to its name which the company has proudly dedicated to its customers and fans around the world.
Growing car sales of Tesla in 2019 signify the increased popularity of electric cars. However, it also shows that the company might soon start generating profits. Its net loss came down by a billion dollars in 2018 compared to the previous year. Tesla CEO Elon Musk is confident about the company’s future. The growing popularity and demand of Tesla cars has also inspired confidence in the investors. Moreover, the popularity of its autodrive technology and growing brand recognition around the world are also expected to support Tesla’s fast growth.
The business of Tesla Motors is organized into two reportable segments that include automotive segment and energy generation and storage segment.
The automobile segment is responsible for the design, development, marketing and sales and leasing of electric vehicles and automotive regulatory credits. Tesla’s regulatory credits are also a good source of revenue for the brand. Other brands buy these credits to offset their sales of polluting vehicles. Since Tesla sells emission free vehicles, it has a lot of regulatory credits remaining to sell to others. Some of the well known customers of Tesla’s zero emissions vehicle credits include GM and Fiat Chrysler. These credits work as an insurance against the pollution regulations. The automobile segment is also responsible for the sales of used vehicles, after sales services, sales of electric vehicle parts and systems to other brands.
The energy generation and storage segment of Tesla is engaged in the making and sales of stationary energy stoarge products, solar energy systems and electricity geenrated fromt he solar energy systems.
Main Sources of Revenue (Operating Segments)
The automotive segment of Tesla is its largest source of revenue. This segment includes sales as well as leasing of automobiles. It generated more than 85% of the brand’s revenue in 2018. Automotive sales alone generated approximately 81% of the company’s revenue in 2018. Automotive leasing is the smallest of all segments that accounted for around 4% of the company’s revenue in 2018. The customers of Tesla automobile business include individual customers as well as vehicle brands.
The energy generation and storage segment as well as the services and other segment together accounted for around 13% of the company’s total revenue. The customers of energy generations and storage segment include individual customers as well as commercial and industrial customers.
Geographical segments of Tesla Motors
United States is the largest geographical segment of Tesla accounting for around 69% of its revenue in 2018. China is another major geographic segment of Tesla. However, its contribution to the total revenue of the brand was less than 10% in 2018. Netherlands and Norway are other major markets of Tesla products. Other countries together ccounted for around 14% of the company’s net revenue in 2018.
Tesla has leading manufacturing facilities in Fremont, California; Lathrop, California; and Tilburg, Netherlands. There is another leading manufacturing facility Gigafactory 1 outside Reno, Nevada as well as Gigafactory 2 in Buffalo, Newyork. The company is also constructing another Gigafactory in Shanghai, China.
The Tesla factory in Fremont, California is among the world’s most advanced automotive manufacturing facilities. There are more than 10,000 employees working at this factory currently. Tesla makes vehicles and certain parts and components at the Fremont and Lathrop factories. The Fremont manufacturing facility includes several manufacturing operations including stamping, machining, casting, plastics, body assembly, paint operations, drive unit production, seat assembly, final vehicle assembly and end-of-line testing. The company also manufactures lithium-ion battery packs, electric motors, gearboxes and components for Model S and Model X at the Tesla Factory.
Tesla’s European headquarters are at Amsterdam, Netherlands. It has an assembly plant in Tilburg, Netherlands. The Tilburg operations of Tesla include final assembly testing and quality control for the Model S and Model X vehicles delivered to the European Union. This plant also works as a warehouse for parts to be distributed to the service centers in Europe as well as a customer service center.
Tesla manufactures battery packs and Model 3 drive units at Gigafactory 1 outside Reno, Nevada. The battery packs Tesla makes at Gigafactory 1 are used in vehicles including Model 3 and energy storage products. Tesla is working on expanding this facility further and increase its production capacity significantly.
Tesla’s main motive behind constructing a Gigafactory at Shanghai is to reduce manufacturing and logistics expenses. It will be able to eliminate certain tariffs that apply to vehicles imported from U.S. The company will be able to keep the Model 3 affordable for consumers in China in this way. Production at this factory is expected to commence by the end of 2019.
Tesla is continuously expanding its supercharger network along well travelled routes. The company has placed 14,081 superchargers along 1,604 supercharger stations. Tesla’s supercharger technology charges vehicles rapidly. It sends alerts when the vehicle is sufficiently charged. Since the supercharger network has grown fast along well travelled routes, drivers would not need to charge their vehicles above 80%. Tesla continues to grow its network of superchargers and destination chargers in North America, Asia and Europe to provide its customers more convenient options for charging.
2018 performance of Tesla Motors
Performance of Tesla improved sharply in 2018. Total revenue that the company generated was equal to $21.5 billion in 2018 compared to $11.76 billion in 2017.
Tesla Motors Performance by Operating Segment
The automobile segment is the largest operating segment of Tesla. In 2018, Tesla’s revenue from automobile segment around doubled compared to the previous year. Total increase was of 92%. Net revenue from the automotive segment was $18.5 billion in 2018 compared to $9.6 billion in 2017. The company generated $17.63 billion in revenue from vehicle sales alone in 2018 as compared to $8.5 billion in 2017. Total revenue from automotive leasing declined by 20% in 2018 compared to last year. Tesla generated $883.5 million from automotive leasing as compared to $1.1 billion in 2017.
Revenue from services and others grew by 39% rising to $1.39 billion from $1 billion. Energy generation and storage revenue also grew by 39% as compared to the last year rising to $1.56 billion in 2018 against $1.12 billion in 2017. Total revenue of the company was $21.5 billion in 2018 against $11.8 billion in 2017.
Tesla Motors Performance by Geographic segment
United States is the largest geographic market of Tesla Motors followed by China. Revenue from United States was 69% of the entire revenue of the brand. In 2018, the revenue of Tesla from the U.S. grew by 140% as compared to the previous year. U.S. revenue of Tesla was $14.9 billion in 2018 compared to $6.2 billion in 2017. Revenue from China declined by around 12% and came down to $1.75 billion compared to $2 billion last year.
Tesla’s revenue from Netherlands grew sharply in 2018 to $965.6 million against $330.3 million in 2017. Revenue from Norway declined by around $10.5 million and came down to $823 million in 2018. Revenue from other countries grew by around 30% and rose to $3 billion in 2018 from $2.35 billion in 2017.
2019 performance (q1 &q2)
Total revenues of Tesla grew substantially in the first quarter of 2019 compared to the same period last year. Net revenues for the first quarter of 2019 were $4.5 billion compared to $3.4 billion last year; yoy growth of 32%. Gross profit during the first quarter grew to $565.7 million compared to $456.5 million during the same period last year. Net loss of the company also reduced to $667.6 million in q1 2019 compared to $784.6 million during the same period last year. Net loss attributable to common stockholders was $702 million in 2019 first quarter compared to $709.5 million during the same period last year.
Tesla’s revenue for the second quarter of 2019 also grew substantially compared to the same period last year. The net revenue of the company grew to $6.35 billion in second quarter of 2019 compared to $4 billion during the same period last year; yoy growth of 58%. Total revenues of the company during the first half of 2019 was $10.9 billion compared to $7.4 billion during the same period last year; yoy growth of around 47%. Net loss attributable to common stockholders was $408.3 million in 2019 first quarter compared to $717.5 million during the same period last year.
Tesla is a renowned global brand of electric vehicles. It was founded in the year 2003. The company is headquartered in Palo Alto, California, United States. Apart from automobiles, Tesla also sells energy generation and storage systems. The automobile product range of Tesla includes Model 3, Model Y, Model S, Model X, Cybertruck, Tesla Semi and a new Tesla Roadster. The company is led by its CEO Elon Musk. In 2019, Tesla delivered around 367,500 vehicles.
Net Revenue of Facebook by Geographic Region 2016-2019
Amounts are in millions.
US & Canada
Rest of the world
The US & Canada account for the largest part of Facebook’s net revenue followed by the European region. In fiscal 2019, United States and Canada together accounted for $32.2 billion of Facebook’s revenue compared to $25.73 billion in 2018. The United States alone accounted for $24.1 billion in fiscal 2019 compared to $17.73 billion in 2018.
Facebook is one of the leading social media platforms with an active user base that runs in billions. The company was incorporated in Delaware in July, 2004. It has its headquarters at Menlo Park, California. Apart from facebook, the company aslo owns messenger, Instagram, Whatsapp, and Oculus. Substantially all of facebook’s revenue comes from advertising. The social media platform of Facebook provides attractive features for building communities and connecting with others as well as advertising and promotions.
Net revenue of Facebook from United States 2012-2019
Amounts are in billions.
United States revenue ($bn)
United States is the largest market for Facebook which generates substantially all of its revenue from advertising. In 2019, the net revenue of Facebook reached $70.7 billion compared to $55.84 billion in 2018. Its net revenue from the United States market grew to $32.2 billion in 2019 compared to $25.73 billion in 2018.
Facebook is one of the leading social media platforms with an active user base that runs in billions. The company was incorporated in Delaware in July, 2004. It has its headquarters at Menlo Park, California. Apart from Facebook, the company also owns Messenger, Instagram, Whatsapp, and Oculus. Substantially all of facebook’s revenue comes from advertising. The social media platform of Facebook provides attractive features for building communities and connecting with others as well as advertising and promotions.
The number of employees working for Facebook grew to 44,942 in 2019 from 35,587 in 2018.
Facebook is one of the leading social media platforms with an active user base that runs in billions. The company was incorporated in Delaware in July 2004. It has its headquarters at Menlo Park, California. Apart from Facebook, the company also owns Messenger, Instagram, Whatsapp, and Oculus. Substantially all of facebook’s revenue comes from advertising. The social media platform of Facebook provides attractive features for building communities and connecting with others as well as advertising and promotions.