- Revenues up 6 percent to $8.2 billion;
8 percent growth on a currency neutral basis*
- Diluted earnings per share up 11
percent to $0.50 compared to prior year
- Inventories up 9 percent as of November
30, 2016
NIKE, Inc. (NYSE:NKE) today reported financial results for its
fiscal 2017 second quarter ended November 30, 2016. Global consumer
demand drove revenue growth across the NIKE Brand portfolio.
Diluted earnings per share were up 11 percent and grew faster than
revenue, primarily due to selling and administrative expense
leverage and a lower average share count.
“NIKE’s ability to attack the opportunities that consistently
drive growth over the near and long term is what sets us apart,”
said Mark Parker, Chairman, President and CEO, NIKE, Inc. “With
industry-defining innovation platforms, highly anticipated
signature basketball styles and more personalized retail
experiences on the horizon, we are well-positioned to carry our
momentum into the back half of the fiscal year and beyond.”**
Second Quarter Income Statement Review
- Revenues for NIKE, Inc.
increased 6 percent to $8.2 billion, up 8 percent on a currency
neutral basis.
- Revenues for the NIKE Brand were $7.7
billion, up 8 percent on a constant currency basis, driven by
double-digit currency neutral growth in Western Europe, Greater
China and the Emerging Markets as well as the Sportswear and
Running categories.
- Revenues for Converse were $416
million, up 5 percent on a currency neutral basis, driven by strong
growth in North America.
- Gross margin contracted 140
basis points to 44.2 percent, as higher average selling prices were
more than offset by higher product costs, unfavorable changes in
foreign exchange rates and the impact of higher off-price
sales.
- Selling and administrative
expense declined 2 percent to $2.5 billion. Demand creation
expense was $762 million, relatively unchanged from the prior year.
Operating overhead expense decreased 3 percent to $1.7 billion, as
continued investments in Direct-to-Consumer (DTC) were offset by
productivity gains compared to the prior year.
- Other income, net was $18
million comprised primarily of non-operating items, and to a lesser
extent, net foreign exchange gains. For the quarter, the Company
estimates the year-over-year change in foreign currency related
gains and losses included in other income, net, combined with the
impact of changes in currency exchange rates on the translation of
foreign currency-denominated profits, decreased pretax income by
approximately $29 million.
- The effective tax rate was 24.4
percent, compared to 19.1 percent for the same period last year,
primarily due to an increased mix of U.S. earnings, which are
generally subject to a higher tax rate.
- Net income increased 7 percent
to $842 million, while diluted earnings per share increased
11 percent to $0.50, reflecting revenue growth, selling and
administrative expense leverage and a three percent decline in the
weighted average diluted common shares outstanding, partially
offset by lower gross margin.
November 30, 2016 Balance Sheet Review
- Inventories for NIKE, Inc. were
$5.0 billion, up 9 percent from November 30, 2015, due to a one
percent increase in NIKE Brand wholesale unit inventories and
increases in average product costs per unit primarily due to
product mix, as well as higher inventories associated with growth
in DTC.
- Cash and short-term investments
were $5.9 billion, $173 million lower than November 30, 2015 as
growth in net income and proceeds from the issuance of debt in the
second quarter of fiscal 2017 were more than offset by share
repurchases, higher dividends, investments in infrastructure and a
reduction in collateral received from counterparties to foreign
currency hedging instruments.
Share Repurchases
During the second quarter, NIKE, Inc. repurchased a total of
17.0 million shares for approximately $900 million as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of November 30, 2016, a total of 56.0 million
shares had been repurchased under this program for approximately
$3.1 billion.
Futures Orders
Worldwide futures orders for the NIKE Brand will be referenced
on our earnings conference calls as deemed appropriate. NIKE Brand
and geography Futures Orders growth versus the prior year will be
posted on the NIKE, Inc. Investor Relations website at
http://investors.nike.com following the call.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on December 20, 2016, to review fiscal
second quarter results. The conference call will be broadcast live
over the Internet and can be accessed at http://investors.NIKE.com.
For those unable to listen to the live broadcast, an archived
version will be available at the same location through 9:00 p.m.
PT, December 27, 2016.
About NIKE, Inc.
NIKE, Inc., based near Beaverton, Oregon, is the world's leading
designer, marketer and distributor of authentic athletic footwear,
apparel, equipment and accessories for a wide variety of sports and
fitness activities. Wholly-owned NIKE, Inc. subsidiary brands
include Converse, which designs, markets and distributes athletic
lifestyle footwear, apparel and accessories; and Hurley, which
designs, markets and distributes surf and youth lifestyle footwear,
apparel and accessories. For more information, NIKE, Inc.’s
earnings releases and other financial information are available on
the Internet at http://investors.NIKE.com and individuals can
follow @NIKE.
* See additional information in the accompanying Divisional
Revenues table regarding this non-GAAP financial measure.
** The marked paragraphs contain forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially. These risks and uncertainties are detailed from
time to time in reports filed by NIKE with the Securities and
Exchange Commission (SEC), including Forms 8-K, 10-Q, and 10-K.
NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
% SIX MONTHS ENDED % (Dollars in millions,
except per share data)
11/30/2016
11/30/2015 Change
11/30/2016 11/30/2015
Change Revenues $ 8,180 $ 7,686 6 % $ 17,241 $
16,100 7 % Cost of sales 4,564
4,185 9 % 9,502
8,604 10 % Gross profit 3,616 3,501 3 % 7,739 7,496 3
% Gross margin 44.2 % 45.6 % 44.9 % 46.6 % Demand creation
expense 762 769 -1 % 1,803 1,601 13 % Operating overhead expense
1,743 1,791 -3 %
3,599 3,536 2 %
Total selling and administrative expense 2,505 2,560 -2 % 5,402
5,137 5 % % of revenue 30.6 % 33.3 % 31.3 % 31.9 % Interest
expense (income), net 15 5 — 22 9 — Other (income) expense, net
(18 ) (34 ) —
(80 ) (65 ) — Income before
income taxes 1,114 970 15 % 2,395 2,415 -1 % Income tax expense
272 185 47 %
304 451 -33 %
Effective tax rate 24.4 % 19.1 % 12.7 % 18.7 %
NET INCOME $ 842
$ 785 7 % $
2,091 $ 1,964
6 % Earnings per common share: Basic $ 0.51 $
0.46 11 % $ 1.26 $ 1.15 10 % Diluted $ 0.50 $ 0.45 11 % $ 1.23 $
1.12 10 % Weighted average common shares outstanding: Basic
1,659.1 1,706.5 1,665.6 1,707.8 Diluted 1,693.2 1,751.4 1,701.3
1,753.4 Dividends declared per common share $ 0.18
$ 0.16 $ 0.34
$ 0.30
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS November
30, November 30,
(Dollars in millions)
2016 2015
% Change
ASSETS Current assets: Cash and equivalents $ 4,339 $ 3,851 13 %
Short-term investments 1,604 2,265 -29 % Accounts receivable, net
3,478 3,437 1 % Inventories 5,033 4,600 9 % Prepaid expenses and
other current assets 1,557 2,197
-29 % Total current assets 16,011 16,350 -2 % Property, plant and
equipment, net 3,566 3,235 10 % Identifiable intangible assets, net
283 281 1 % Goodwill 139 131 6 % Deferred income taxes and other
assets1 2,653 2,567 3 %
TOTAL
ASSETS $ 22,652 $
22,564 0 % LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $ 44 $ 5 780 % Notes payable 20 99 -80 % Accounts
payable 2,033 1,915 6 % Accrued liabilities1 3,076 3,449 -11 %
Income taxes payable 52 41 27 %
Total current liabilities 5,225 5,509 -5 % Long-term debt 3,473
2,050 69 % Deferred income taxes and other liabilities1 1,631 1,600
2 % Redeemable preferred stock — — — Shareholders' equity
12,323 13,405 -8 %
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 22,652
$ 22,564 0 % 1 During the fourth
quarter of fiscal 2016, NIKE, Inc. adopted Accounting Standards
Update No. 2015-17, which requires all deferred tax assets and
deferred tax liabilities to be classified as non-current. All
periods presented have been updated to reflect these changes.
NIKE, Inc. DIVISIONAL REVENUES
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED %
Currency
SIX MONTHS ENDED %
Currency
(Dollars in millions)
11/30/2016
11/30/2015 Change
Changes1
11/30/2016 11/30/2015
Change
Changes1
North America Footwear $ 2,219 $ 2,162 3 % 3 % $ 4,737 $
4,528 5 % 5 % Apparel 1,273 1,221 4 % 4 % 2,590 2,468 5 % 5 %
Equipment 158 164 -4 %
-3 % 354 350 1 %
1 % Total 3,650 3,547 3 % 3 % 7,681 7,346 5 % 5 %
Western
Europe Footwear 865 845 2 % 8 % 2,012 1,973 2 % 5 % Apparel 454
391 16 % 23 % 985 825 19 % 25 % Equipment 66
63 5 % 12 % 151
142 6 % 11 % Total 1,385 1,299 7 % 12 %
3,148 2,940 7 % 11 %
Central & Eastern Europe Footwear
192 183 5 % 6 % 462 421 10 % 13 % Apparel 120 126 -5 % -4 % 258 259
0 % 4 % Equipment 16 17
-6 % -6 % 48 47 2
% 6 % Total 328 326 1 % 1 % 768 727 6 % 10 %
Greater
China Footwear 669 600 12 % 16 % 1,379 1,199 15 % 21 % Apparel
355 306 16 % 21 % 624 552 13 % 18 % Equipment 31
32 -3 % 3 % 72
73 -1 % 3 % Total 1,055 938 12 %
17 % 2,075 1,824 14 % 19 %
Japan Footwear 151 128 18 % 0 %
317 250 27 % 8 % Apparel 70 63 11 % -6 % 130 106 23 % 5 % Equipment
17 14 21 % 9 %
36 28 29 % 11 %
Total 238 205 16 % -2 % 483 384 26 % 7 %
Emerging Markets
Footwear 726 674 8 % 15 % 1,387 1,344 3 % 14 % Apparel 263 255 3 %
9 % 497 493 1 % 11 % Equipment 58 55
5 % 10 % 108 113
-4 % 4 % Total 1,047 984 6 % 13 % 1,992 1,950
2 % 12 %
Global Brand Divisions2 21
18 17 % 17 % 36
44 -18 % -21 %
Total NIKE
Brand 7,724 7,317 6 %
8 % 16,183 15,215
6 % 9 % Converse 416 398 5 % 5 % 990 953 4 % 5 % Corporate3
40 (29 ) — —
68 (68 ) —
—
Total NIKE, Inc. Revenues $ 8,180 $
7,686 6 % 8 % $ 17,241 $ 16,100
7 % 9 %
Total NIKE Brand
Footwear $ 4,822 $ 4,592 5 % 7 % $ 10,294 $ 9,715 6 % 8 % Apparel
2,535 2,362 7 % 9 % 5,084 4,703 8 % 11 % Equipment 346 345 0 % 2 %
769 753 2 % 4 % Global Brand Divisions2 21
18 17 % 17 % 36
44 -18 % -21 %
1 Fiscal 2017 results have been restated
using fiscal 2016 exchange rates for the comparative period to
enhance the visibility of the underlying business trends excluding
the impact of translation arising from foreign currency exchange
rate fluctuations, which is considered a non-GAAP financial
measure.
2 Global Brand Divisions revenues are
primarily attributable to NIKE Brand licensing businesses that are
not part of a geographic operating segment.
3 Corporate revenues primarily consist of
foreign currency hedge gains and losses related to revenues
generated by entities within the NIKE Brand geographic operating
segments and Converse but managed through our central foreign
exchange risk management program.
NIKE, Inc. EARNINGS BEFORE INTEREST AND
TAXES1
THREE MONTHS ENDED % SIX MONTHS ENDED %
(Dollars in millions)
11/30/2016
11/30/2015 Change
11/30/2016 11/30/2015
Change North America $ 912 $ 882 3 % $ 1,916 $ 1,924
0 % Western Europe 236 307 -23 % 628 792 -21 % Central &
Eastern Europe 58 76 -24 % 139 174 -20 % Greater China 375 327 15 %
746 657 14 % Japan 48 47 2 % 98 83 18 % Emerging Markets 237 241 -2
% 408 499 -18 % Global Brand Divisions2 (619 )
(625 ) 1 % (1,390 )
(1,249 ) -11 %
TOTAL NIKE BRAND
1,247 1,255
-1 % 2,545
2,880 -12 % Converse 78 85 -8 %
231 232 0 % Corporate3 (196 ) (365 )
46 % (359 ) (688 ) 48 %
TOTAL EARNINGS BEFORE INTEREST AND TAXES
1,129 975
16 % 2,417
2,424 0 % Interest expense
(income), net 15 5
— 22 9 —
TOTAL INCOME BEFORE INCOME TAXES $
1,114 $ 970
15 % $ 2,395
$ 2,415 -1 %
1 The Company evaluates performance of
individual operating segments based on earnings before interest and
taxes (commonly referred to as “EBIT”), which represents net income
before interest expense (income), net and income tax expense and is
considered a non-GAAP financial measure.
2 Global Brand Divisions primarily
represent demand creation, operating overhead and product creation
and design expenses that are centrally managed for the NIKE Brand.
Revenues for Global Brand Divisions are primarily attributable to
NIKE Brand licensing businesses that are not part of a geographic
operating segment.
3 Corporate consists largely of
unallocated general and administrative expenses, including expenses
associated with centrally managed departments; depreciation and
amortization related to the Company’s corporate headquarters;
unallocated insurance, benefit and compensation programs, including
stock-based compensation; and certain foreign currency gains and
losses, including certain hedge gains and losses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161220005994/en/
NIKE, Inc.Investor Contact:Nitesh Sharan, 503-532-2828orMedia
Contact:Kellie Leonard, 503-671-6171
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