NIKE, Inc. (NYSE:NKE) today reported financial results for its
fiscal 2018 third quarter ended February 28, 2018. Revenue growth
was led by international geographies and NIKE Direct globally.
Diluted net loss per share was $0.57, reflecting significantly
higher income tax expense from the enactment of the Tax Cuts and
Jobs Act (the “Tax Act”). The impact of the Tax Act resulted in
one-time provisional charges that reduced diluted earnings per
share by $1.25.
“NIKE’s Consumer Direct Offense drove strong double-digit growth
across our international geographies, led by Greater China,” said
Mark Parker, Chairman, President and CEO, NIKE, Inc. “As we close
Q3, we now see a significant reversal of trend in North America, as
momentum accelerates through the scaling of new innovation
platforms and differentiated NIKE Consumer Experiences expand
across the marketplace.”*
Third Quarter Income Statement Review
- Revenues for NIKE, Inc.
increased 7 percent to $9.0 billion, up 3 percent on a
currency-neutral basis.**
- Revenues for the NIKE Brand were $8.5
billion, up 4 percent on a currency-neutral basis, driven by
Greater China, EMEA and APLA, including double-digit growth in NIKE
Direct and growth in Sportswear and NIKE Basketball.
- Revenues for Converse were $483
million, down 8 percent on a currency-neutral basis, as
international and digital growth were more than offset by declines
in North America.
- Gross margin declined 70 basis
points to 43.8 percent due primarily to unfavorable changes in
foreign currency exchange rates, which were partially offset by
lower product costs.
- Selling and administrative
expense increased 11 percent to $2.8 billion. Demand creation
expense was $862 million, up 15 percent, primarily driven by higher
spend in sports marketing, brand moments and new innovation
launches. Operating overhead expense increased 9 percent to $1.9
billion, largely due to higher administrative costs and continued
investments in global digital capabilities and the NikePlus
membership program.
- Income before income taxes
decreased 12 percent to $1.2 billion as solid revenue growth was
more than offset by lower gross margin, higher selling and
administrative expense and lower other income.
- The effective tax rate was 179.5
percent, driven by the Tax Act, which impacted comparability.
During the quarter, as a result of enactment of the Tax Act on
December 22, 2017, the Company recorded additional income tax
expense of $2.0 billion primarily related to the transition tax on
our accumulated foreign earnings and the remeasurement of deferred
tax assets and liabilities. This amount was recorded as a
provisional estimate and is subject to change as the Company
completes its analysis during the measurement period, which should
not extend beyond one year from the enactment date.
- Net loss was $921 million and
diluted net loss per share was $0.57, driven by the enactment of
the Tax Act.
February 28, 2018 Balance Sheet Review
- Inventories for NIKE, Inc. were
$5.4 billion, up 9 percent from February 28, 2017, driven primarily
by strengthening demand globally and, to a lesser extent, changes
in foreign currency exchange rates.
- Cash and equivalents and short-term
investments were $4.8 billion, $1.4 billion lower than last
year as share repurchases, dividends and investments in
infrastructure more than offset net income and proceeds from
employee exercises of stock options.
Share Repurchases
During the third quarter, NIKE, Inc. repurchased a total of 14.6
million shares for approximately $962 million as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of February 28, 2018, a total of 126.4 million
shares had been repurchased under this program for approximately
$7.2 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on March 22, 2018, to review fiscal
third quarter results. The conference call will be broadcast live
via webcast 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, March
29, 2018.
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.
(Tables Follow)
NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
% NINE MONTHS ENDED % (Dollars in millions,
except per share data)
2/28/2018
2/28/2017 Change
2/28/2018 2/28/2017
Change Revenues $ 8,984 $ 8,432 7 % $ 26,608 $ 25,673
4 % Cost of sales 5,046 4,682
8 % 15,030 14,184
6 % Gross profit 3,938 3,750 5 % 11,578 11,489 1 %
Gross margin 43.8 % 44.5 % 43.5 % 44.8 % Demand creation
expense 862 749 15 % 2,594 2,552 2 % Operating overhead expense
1,905 1,747 9 %
5,797 5,346 8 %
Total selling and administrative expense 2,767 2,496 11 % 8,391
7,898 6 % % of revenues 30.8 % 29.6 % 31.5 % 30.8 % Interest
expense (income), net 13 19 — 42 41 — Other (income) expense, net
(1 ) (88 ) —
35 (168 ) — Income before
income taxes 1,159 1,323 -12 % 3,110 3,718 -16 % Income tax expense
2,080 182 1,043 %
2,314 486 376 %
Effective tax rate 179.5 % 13.8 % 74.4 % 13.1 %
NET (LOSS) INCOME $ (921
) $ 1,141 -181
% $ 796 $
3,232 -75 % (Loss)
earnings per common share: Basic $ (0.57 ) $ 0.69 -183 % $ 0.49 $
1.95 -75 % Diluted $ (0.57 ) $ 0.68 -184 % $ 0.48 $ 1.91 -75 %
Weighted average common shares outstanding: Basic 1,623.5
1,653.1 1,629.9 1,661.5 Diluted 1,623.5 1,686.3 1,665.7 1,696.4
Dividends declared per common share $ 0.20
$ 0.18 $ 0.58 $
0.52
NIKE, Inc. CONSOLIDATED
BALANCE SHEETS February 28,
February 28,
(Dollars in millions)
2018 2017
% Change
ASSETS Current assets: Cash and equivalents $ 3,662 $ 4,021 -9 %
Short-term investments 1,089 2,139 -49 % Accounts receivable, net
3,792 3,752 1 % Inventories 5,366 4,932 9 % Prepaid expenses and
other current assets 1,446 1,361
6 % Total current assets 15,355 16,205 -5 % Property, plant and
equipment, net 4,298 3,793 13 % Identifiable intangible assets, net
282 283 0 % Goodwill 139 139 0 % Deferred income taxes and other
assets 2,478 2,732 -9 %
TOTAL
ASSETS $ 22,552 $
23,152 -3 % LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $ 6 $ 6 0 % Notes payable 11 23 -52 % Accounts
payable 1,961 1,938 1 % Accrued liabilities 3,727 3,228 15 % Income
taxes payable 78 76 3 % Total
current liabilities 5,783 5,271 10 % Long-term debt 3,469 3,472 0 %
Deferred income taxes and other liabilities 3,518 1,687 109 %
Redeemable preferred stock — — — Shareholders' equity
9,782 12,722 -23 %
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 22,552
$ 23,152 -3 % NIKE,
Inc. DIVISIONAL REVENUES1
% Change % Change
Excluding Excluding
THREE MONTHS ENDED
%
Currency
NINE MONTHS ENDED
%
Currency (Dollars in millions)
2/28/2018
2/28/2017 Change
Changes2
2/28/2018 2/28/2017
Change
Changes2
North America Footwear $ 2,293 $ 2,490 -8% -8% $ 6,797 $
7,227 -6% -6% Apparel 1,153 1,154 0% 0% 3,731 3,744 0% 0% Equipment
125 138 -9% -9% 452 492
-8% -8% Total 3,571 3,782 -6% -6% 10,980 11,463 -4%
-4%
Europe, Middle East & Africa Footwear 1,489 1,271
17% 7% 4,250 3,844 11% 6% Apparel 713 566 26% 15% 2,199 1,838 20%
15% Equipment 97 88 10% 0% 327
297 10% 6% Total 2,299 1,925 19% 9% 6,776
5,979 13% 9%
Greater China Footwear 939 776 21% 16% 2,493
2,155 16% 14% Apparel 368 271 36% 30% 1,074 895 20% 19% Equipment
29 28 4% -4% 99 100
-1% -2% Total 1,336 1,075 24% 19% 3,666 3,150 16% 15%
Asia Pacific & Latin America Footwear 884 777 14% 12%
2,584 2,382 8% 9% Apparel 321 278 15% 13% 964 876 10% 11% Equipment
63 67 -6% -7% 182 201
-9% -9% Total 1,268 1,122 13% 11% 3,730 3,459 8% 8%
Global Brand Divisions3 21 19
11% 11% 64 55 16% 15%
TOTAL
NIKE BRAND 8,495 7,923
7% 4% 25,216
24,106 5% 3% Converse 483 498
-3% -8% 1,374 1,488 -8% -10% Corporate4 6 11 —
— 18 79 — —
TOTAL NIKE, INC.
REVENUES $ 8,984 $ 8,432
7% 3% $ 26,608 $
25,673 4% 2% TOTAL NIKE
BRAND Footwear $ 5,605 $ 5,314 5% 2% $ 16,124 $ 15,608 3% 2%
Apparel 2,555 2,269 13% 9% 7,968 7,353 8% 7% Equipment 314 321 -2%
-6% 1,060 1,090 -3% -4% Global Brand Divisions3 21 19
11% 11% 64 55 16% 15%
TOTAL NIKE BRAND REVENUES $ 8,495 $
7,923 7% 4% $ 25,216
$ 24,106 5% 3%
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 % NINE MONTHS ENDED
% (Dollars in millions)
2/28/2018
2/28/2017 Change 2/28/2018
2/28/2017 Change North America $ 840 $
980 -14 % $ 2,625 $ 2,896 -9 % Europe, Middle East & Africa 417
361 16 % 1,205 1,159 4 % Greater China 496 381 30 % 1,268 1,127 13
% Asia Pacific & Latin America 298 228 31 % 849 703 21 % Global
Brand Divisions3 (649 ) (598 )
-9 % (1,926 ) (1,988 ) 3 %
TOTAL NIKE BRAND 1,402
1,352 4 %
4,021 3,897
3 % Converse 69 109 -37 % 206 340 -39 % Corporate4
(299 ) (119 ) -151 %
(1,075 ) (478 ) -125 %
TOTAL NIKE,
INC. EARNINGS BEFORE INTEREST AND TAXES
1,172 1,342
-13 % 3,152
3,759 -16 % Interest expense
(income), net 13 19
— 42 41
—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
$ 1,159 $ 1,323
-12 % $ 3,110
$ 3,718 -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: https://www.businesswire.com/news/home/20180322006196/en/
NIKE, Inc.Investor Contact:Nitesh
Sharan, 503-532-2828orMedia
Contact:Kellie Leonard, 503-671-6171
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