While every product type reported higher revenues for the quarter, we posted 18% growth in footwear, our largest and most profitable business. And while we delivered double-digit growth in wholesale revenues, DTC grew even faster.
Q1 results recap
With that introduction, I’ll now recap our Q1 results. NIKE Inc. first quarter revenue grew 15% on both a reported and currency neutral basis. NIKE brand revenue increased 15%, and Converse revenue increased 16%.
NIKE brand futures orders grew 14% on a currency neutral basis, driven by a 9% increase in units and a 5% increase in average selling price. The increase was led by double-digit growth in North America and both European geographies, including strong growth in sportswear, basketball, running, and women’s training.
On a reported basis, futures grew 11%, reflecting weaker international currencies, particularly in Japan, Argentina, Russia, and Turkey. First quarter diluted EPS increased 27% to $1.09, driven by strong revenue growth and gross margin expansion, partially offset by increased SG&A investments.
EPS also benefited from a lower tax rate and reduced share count, which together accounted for about 9 points of EPS growth. Gross margin increased 170 basis points in the quarter, driven by higher average selling prices, a mix shift to higher margin products, the continued strength of our DTC business, and a modest FX tailwind.
Gross margin also benefited from a mix shift to higher margin geographies. These upsides more than offset downward pressure from product input cost inflation. Gross margin for the quarter was better than expected, primarily due to a more significant mix shift to higher margin products and geographies, as well as stronger revenue growth in our DTC business.
Driven primarily by World Cup marketing, Q1 demand creation increased 23%, lower growth than we projected 90 days ago. As Trevor noted earlier, our World Cup marketing in Q1 was highly effective, driving energy around the world and across categories.
As a result, we decided to shift some demand creation investment to the balance of the year to support upcoming brand and product initiatives. Operating overhead grew 19% in Q1, reflecting investments in DTC, digital innovation, and infrastructure.
Other expense net was $3 million for the quarter, down significantly from Q1 of FY14, when exchange rate movements in developing markets led to significant currency conversion losses. The effective tax rate for the first quarter was 21.7%, better than expected due to the resolution of tax audits in several jurisdictions and an increase in earnings from operations outside the U.S., which are generally subject to a lower tax rate.
Our return on invested capital continues to be strong, as ROIC reached 26.2%, 70 basis points above last year. Inventories at August 31 were up 14% year on year and remained healthy overall, with the majority of the growth driven by North America and Europe, as well as the expansion of our DTC business around the world.
Our primary areas of focus for inventory management are Brazil and Mexico, where we continue to balance supply and demand to position those markets for ongoing growth.
Now let’s take a look at our performance by segment. In North America, Q1 revenue increased 12% on both a reported and currency neutral basis, led by double-digit growth in basketball, women’s training, and global football.
For the quarter, footwear revenue increased 15%, while apparel grew 10%. Direct-to-consumer revenues increased 22% in Q1, driven by 11% comp store sales growth and significantly higher NIKE.com revenues.
On a reported basis, Q1 EBIT for North America grew 19%, due to strong revenue growth and gross margin expansion.
For Q1, Western Europe revenue grew 25% on a currency neutral basis, with double-digit growth across all territories and categories. As both Mark and Trevor discussed, we’re very pleased with the results of our work to develop an integrated marketplace with engaging, differentiated retail presentations. Both DTC and wholesale revenues advanced strongly for the quarter.
On a reported basis for Q1, Western Europe revenue increased 32%, while EBIT jumped 52%, driven by revenue growth and gross margin expansion, as well as the translation benefit of a stronger euro.
In central and eastern Europe, currency-neutral revenues rose 9%, with growth across all key categories except action sports, and all territories except Russia and Israel. We continue to closely monitor the situation in these markets, and remain focused on the things we control: building strong consumer connections, leading with innovative products, and managing a healthy marketplace.
Overall, we’re pleased with our results in CEE, and remain confident in this geography’s growth prospects. On a reported basis, revenue for CEE grew 7%, but EBIT declined 16%, reflecting FX headwinds, particularly in Russia, lower gross margins, and SG&A investments to support the World Cup.
In Greater China, currency-neutral revenue grew 20% for the quarter, with double-digit growth in our three largest categories: sportswear, basketball, and running. As Trevor discussed, we’re seeing the results of our strategies to sharpen our product assortments and reset the marketplace.
On a reported basis for Q1, China revenue rose 18% while EBIT grew 28% as higher revenues and gross margin expansion more than offset the impact of SG&A investments in DTC and our new Shanghai campus.
On our last earnings call, we projected revenues in China to grow at a somewhat faster rate in Q1 than for the full year, due to changes in seasonal product flow and significant variations in prior year comparisons. Q1 growth was even stronger than we expected, due to higher DTC revenue growth and at once sales. We expect these trends to continue, driving FY15 revenue growth for China to a low to mid-teens rate, with the growth heavily weighted to the first half.
In the emerging markets, currency neutral revenues increased 10%, reflecting revenue growth in every territory except Mexico and our Latin American distributors. From a category perspective, the growth was led by double-digit growth in sportswear, running, global football, basketball, and women’s training.
On a reported basis, Q1 revenue for the emerging markets grew 4%, but EBIT declined 26% as a result of marketing investments in the World Cup and FX headwinds in a number of markets. We remain confident in the significant growth potential of this geography, and as Trevor discussed, we’re focused on doing the right things now to evolve these developing marketplaces and further strengthen our brand to generate sustainable, profitable growth for years to come.
First quarter revenue for Converse increased 16% on a reported and currency neutral basis, driven by market conversions in Europe and Asia, as well as continued growth in direct distribution markets such as the U.S. and the UK. EBIT increased 10% for the quarter, as revenue growth was partially offset by investments in DTC and infrastructure to support the brand’s long-term growth and profitability.