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GuruFocus has detected 2 Warning Signs with Nike Inc \$NKE.
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Nike Inc (NYSE:NKE)
Gross Profit
\$15,275 Mil (TTM As of Feb. 2017)

Nike Inc's gross profit for the three months ended in Feb. 2017 was \$3,750 Mil. Nike Inc's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was \$15,275 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Nike Inc's gross profit for the three months ended in Feb. 2017 was \$3,750 Mil. Nike Inc's revenue for the three months ended in Feb. 2017 was \$8,432 Mil. Therefore, Nike Inc's Gross Margin for the quarter that ended in Feb. 2017 was 44.47%.

Nike Inc had a gross margin of 44.47% for the quarter that ended in Feb. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Nike Inc was 46.28%. The lowest was 43.50%. And the median was 44.95%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Nike Inc's Gross Profit for the fiscal year that ended in May. 2016 is calculated as

 Gross Profit (A: May. 2016 ) = Revenue - Cost of Goods Sold = 32376 - 17405 = 14,971

Nike Inc's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

 Gross Profit (Q: Feb. 2017 ) = Revenue - Cost of Goods Sold = 8432 - 4682 = 3,750

Nike Inc Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was 3786 (May. 2016 ) + 4123 (Aug. 2016 ) + 3616 (Nov. 2016 ) + 3750 (Feb. 2017 ) = \$15,275 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Nike Inc's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

 Gross Margin (Q: Feb. 2017 ) = Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 3,750 / 8432 = 44.47 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Nike Inc had a gross margin of 44.47% for the quarter that ended in Feb. 2017 => Durable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Nike Inc Annual Data

 May07 May08 May09 May10 May11 May12 May13 May14 May15 May16 Gross_Profit 7,161 8,387 8,604 8,800 9,202 10,148 11,034 12,446 14,067 14,971

Nike Inc Quarterly Data

 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 Gross_Profit 3,327 3,426 3,593 3,995 3,501 3,689 3,786 4,123 3,616 3,750
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