NIKE, Inc. (NYSE:NKE) today reported fiscal 2018 financial
results for its first quarter ended August 31, 2017. For the
quarter, sustained revenue growth in international geographies and
NIKE Direct globally was offset by an expected decline in North
America wholesale revenue.
Diluted earnings per share for the quarter were $0.57, down 22
percent driven by a gross margin decline, a higher effective tax
rate and higher other expense, net, partially offset by lower
selling and administrative expense and a lower average share
count.
“This quarter, we captured near-term opportunities through our
new Consumer Direct Offense,” said Mark Parker, Chairman, President
and CEO, NIKE, Inc. “Looking ahead to the rest of fiscal 2018, we
will ignite NIKE’s next horizon of global growth through the
strength of our brand, the power of our innovative products and the
most personal, digitally-connected experiences in our
industry.”*
As previously announced on June 15, 2017, a new company
alignment was created as a result of the Consumer Direct Offense
which simplified NIKE Brand’s geography structure from six
geographies to four consisting of North America; Europe, Middle
East & Africa (EMEA); Greater China; and Asia Pacific &
Latin America (APLA). The financial results for the NIKE Brand are
now reported based on these four operating segments.
First Quarter Income Statement Review
- Revenues for NIKE, Inc. were
$9.1 billion, flat to prior year on both a reported and
currency-neutral basis.**
- Revenues for the NIKE Brand were $8.6
billion, up 2 percent on a currency-neutral basis driven by growth
in Greater China, EMEA and APLA, including growth in
Sportswear.
- Revenues for Converse were $483
million, down 16 percent on a currency-neutral basis, mainly driven
by declines in North America.
- Gross margin declined 180 basis
points to 43.7 percent due primarily to unfavorable changes in
foreign currency exchange rates and, to a lesser extent, a higher
mix of off-price sales.
- Selling and administrative
expense decreased 1 percent to $2.9 billion. Demand creation
expense was $855 million, down 18 percent, reflecting higher prior
year investments in key sports events. Operating overhead expense
increased 8 percent to $2.0 billion driven by realignment costs
associated with a previously announced workforce reduction in June
and continued investments in NIKE Direct.
- Other expense, net was $18
million, primarily comprised of net foreign currency exchange
losses.
- The effective tax rate was 11.4
percent, compared to 2.5 percent for the same period last year,
reflecting the tax benefit from stock-based compensation in the
current period as a result of the adoption of Accounting Standards
Update 2016-09. The prior year period included a one-time benefit
related to the resolution with the IRS of a foreign tax credit
matter.
- Net income decreased 24 percent
to $950 million as lower selling and administrative expense was
offset by a gross margin decline, a higher effective tax rate and
growth in other expense, net, while diluted earnings per
share decreased 22 percent from the prior year to $0.57
reflecting a nearly 2 percent decline in the weighted average
diluted common shares outstanding.
August 31, 2017 Balance Sheet Review
- Inventories for NIKE, Inc. were
$5.2 billion, up 6 percent from August 31, 2016, driven by a higher
average cost per unit primarily due to product mix and, to a lesser
extent, changes in foreign currency exchange rates and growth in
NIKE Direct businesses.
- Cash and equivalents and short-term
investments were $5.5 billion, $732 million higher than last
year as net income and proceeds from the issuance of debt in the
second quarter of fiscal 2017 were partially offset by share
repurchases, dividends and investments in infrastructure.
Share Repurchases
During the first quarter, NIKE, Inc. repurchased a total of 15.3
million shares for approximately $849 million as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of August 31, 2017, a total of 95.0 million
shares had been repurchased under this program for approximately
$5.3 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on September 26, 2017, to review fiscal
first 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, October 3, 2017.
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. Individuals can also
visit http://news.nike.com and follow @NIKE.
* The marked paragraph contains 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.
** See additional information in the accompanying Divisional
Revenues table regarding this non-GAAP financial measure.
NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED % (Dollars in
millions, except per share data)
8/31/2017
8/31/2016 Change
Revenues $ 9,070 $ 9,061 0 % Cost of sales 5,108
4,938 3 % Gross profit 3,962
4,123 -4 % Gross margin 43.7 % 45.5 % Demand creation
expense 855 1,041 -18 % Operating overhead expense
2,001 1,856 8 % Total selling
and administrative expense 2,856 2,897 -1 % % of revenues 31.5 %
32.0 % Interest expense (income), net 16 7 — Other expense
(income), net 18 (62 ) —
Income before income taxes 1,072 1,281 -16 % Income tax
expense 122 32 281
% Effective tax rate 11.4 % 2.5 %
NET INCOME $ 950
$ 1,249 -24
% Earnings per common share: Basic $ 0.58 $ 0.75 -23
% Diluted $ 0.57 $ 0.73 -22 % Weighted average common shares
outstanding: Basic 1,639.1 1,672.0 Diluted 1,676.9 1,708.9
Dividends declared per common share $ 0.18 $
0.16
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS August
31, August 31, % Change (Dollars in millions)
2017 2016
ASSETS Current assets: Cash and equivalents $ 3,413 $ 2,659 28 %
Short-term investments 2,106 2,128 -1 % Accounts receivable, net
3,871 3,526 10 % Inventories 5,211 4,896 6 % Prepaid expenses and
other current assets 1,591 1,380
15 % Total current assets 16,192 14,589 11 % Property, plant and
equipment, net 4,086 3,572 14 % Identifiable intangible assets, net
283 284 0 % Goodwill 139 139 0 % Deferred income taxes and other
assets 2,947 2,572 15 %
TOTAL
ASSETS $ 23,647 $
21,156 12 % LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $ 7 $ 44 -84 % Notes payable 335 22 — Accounts
payable 2,116 2,088 1 % Accrued liabilities 3,501 3,147 11 % Income
taxes payable 97 62 56 % Total
current liabilities 6,056 5,363 13 % Long-term debt 3,472 1,993 74
% Deferred income taxes and other liabilities 2,126 1,635 30 %
Redeemable preferred stock — — — Shareholders' equity
11,993 12,165 -1 %
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 23,647
$ 21,156 12 %
NIKE, Inc. DIVISIONAL REVENUES1
% Change
Excluding
THREE MONTHS ENDED
Currency
(Dollars in millions)
8/31/2017
8/31/2016
% Change
Changes2
North America Footwear $ 2,434 $ 2,518 -3 % -3 % Apparel
1,299 1,317 -1 % -1 % Equipment 191 196
-3 % -3 % Total 3,924 4,031 -3 % -3 %
Europe, Middle East
& Africa Footwear 1,471 1,457 1 % 2 % Apparel 743 684 9 %
10 % Equipment 130 121 7 % 8 %
Total 2,344 2,262 4 % 5 %
Greater China Footwear 761 710 7 %
10 % Apparel 309 269 15 % 18 % Equipment 38 41
-7 % -3 % Total 1,108 1,020 9 % 12 %
Asia Pacific
& Latin America Footwear 827 787 5 % 6 % Apparel 301 279 8
% 9 % Equipment 61 65 -6 % -5 %
Total 1,189 1,131 5 % 6 %
Global Brand Divisions3
20 15 33 % 16 %
TOTAL NIKE
BRAND 8,585 8,459
1 % 2 % Converse 483 574 -16 %
-16 % Corporate4 2 28 — —
TOTAL NIKE, INC. REVENUES $ 9,070
$ 9,061 0 %
0 % TOTAL NIKE BRAND Footwear $ 5,493 $
5,472 0 % 1 % Apparel 2,652 2,549 4 % 5 % Equipment 420 423 -1 % 0
% Global Brand Divisions3 20 15 33 %
16 %
TOTAL NIKE BRAND REVENUES $ 8,585
$ 8,459 1 %
2 % 1 Certain prior year amounts have been
reclassified to conform to fiscal 2018 presentation. This includes
reclassified operating segment data to reflect the changes in the
Company's operating structure, which became effective June 1, 2017.
These changes had no impact on previously reported consolidated
results of operations or shareholders' equity. 2 The
percentage change has been calculated using actual exchange rates
in use during the comparative prior year period to enhance the
visibility of the underlying business trends by excluding the
impact of translation arising from foreign currency exchange rate
fluctuations, which is considered a non-GAAP financial measure.
3 Global Brand Divisions revenues are primarily attributable
to NIKE Brand licensing businesses that are not part of a
geographic operating segment. 4 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 TAXES1,2
THREE MONTHS ENDED
(Dollars in millions)
8/31/2017
8/31/2016
% Change
North America $ 1,002 $ 1,004 0 % Europe, Middle East & Africa
451 485 -7 % Greater China 394 371 6 % Asia Pacific & Latin
America 260 209 24 % Global Brand Divisions3 (675 )
(771 ) 12 %
TOTAL NIKE BRAND
1,432 1,298
10 % Converse 89 153 -42 % Corporate4 (433 )
(163 ) -166 %
TOTAL NIKE, INC. EARNINGS
BEFORE INTEREST AND TAXES 1,088
1,288 -16 % Interest
expense (income), net 16 7
—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
$ 1,072 $ 1,281
-16 %
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.
2 Certain prior year amounts have been reclassified to
conform to fiscal 2018 presentation. This includes reclassified
operating segment data to reflect the changes in the Company's
operating structure, which became effective June 1, 2017. These
changes had no impact on previously reported consolidated results
of operations or shareholders' equity.
3 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.
4 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/20170926006688/en/
NIKE, Inc.Investor Contact: Nitesh
Sharan, 503-532-2828Media Contact:
Kellie Leonard, 503-671-6171
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