rates relative to the prior year, primarily in the Western Europe and Central and Eastern Europe geographies. Gross pricing margins were lower, primarily driven by higher product input costs, most notably for footwear products. Higher levels of discounts were provided across all businesses in fiscal 2009 to manage inventory levels.

Selling and Administrative Expense

Fiscal 2010 Compared to Fiscal 2009

Changes in foreign currency exchange rates increased selling and administrative expense by 1 percentage point in fiscal 2010.

Excluding changes in exchange rates, operating overhead expense increased 4% compared to the prior year due primarily to increases in performance−based compensation and investments in NIKE−owned retail. These increases were partially offset by reductions in compensation spending in fiscal 2010 as a result of restructuring activities that took place in the fourth quarter of fiscal 2009.



In fiscal 2010, changes in currency exchange rates had a minimal impact on demand creation expense. Demand creation expense remained flat compared to the prior year, as increases in sports marketing and digital marketing expenses were offset by reductions in advertising.

In fiscal 2011, we will continue to focus our resources on those investments that drive sustainable and profitable growth. We expect demand creation will increase at a slightly slower rate than revenues, with spending weighted toward the first quarter driven by key events including the 2010 World Cup. We anticipate operating overhead will grow at a mid single−digit rate, with faster growth in the first half of the fiscal year, driven by increased investments in our NIKE−owned retail business.

Fiscal 2009 Compared to Fiscal 2008

Changes in foreign currency exchange rates decreased selling and administrative expense by 2 percentage points in fiscal 2009. Excluding changes in exchange rates, operating overhead increased 6% during fiscal 2009. The increase in operating overhead was primarily attributable to investments in growth drivers such as NIKE−owned retail in the North America, Western Europe, Greater China, and Japan geographies, infrastructure for the Emerging Markets and Central and Eastern Europe geographies as well as for our non−NIKE Brand businesses, which more than offset steps taken to reduce operating overhead spending, including implementation of a hiring freeze and reductions in spending for travel and meetings.

On a constant−currency basis, demand creation expense increased 3% during fiscal 2009. Demand creation spending decreased in the second half of fiscal 2009 as a result of actions taken to reduce spending across nearly all demand creation related activities, most notably traditional media and print advertising. The increase in demand creation during the first half of fiscal 2009 was primarily attributable to strategic investments, including first quarter spending around the Beijing Summer Olympics and the European Football Championships, and increased investments in athlete and team endorsements across all geographies.

Restructuring Charges

During fiscal 2009, we restructured the organization to streamline our management structure, enhance