NIKE, Inc. (NYSE:NKE) today reported fiscal 2020 financial
results for its second quarter ended November 30, 2019.
Revenue increased to $10.3 billion in the second quarter, up 10
percent on a reported basis and up 13 percent on a currency-neutral
basis*, driven by strong growth across all geographies.
“In Q2, NIKE has proven again that innovation is our greatest
competitive edge – turning athlete insights into breakthrough
product and digital services, as we offer more choice to more
consumers at an accelerated pace,” said Mark Parker, Chairman,
President and CEO, NIKE, Inc. “Our entire NIKE team is fueling our
current momentum, and I’ve never been more optimistic about the
future of this company.”**
Diluted earnings per share for the quarter was $0.70, an
increase of 35 percent driven primarily by strong revenue growth,
gross margin expansion, selling and administrative expense
leverage, a lower tax rate and a lower average share count.
“NIKE delivered another strong quarter of accelerating,
high-quality growth, driven by strategic and targeted investment in
our digital transformation,” said Andy Campion, Executive Vice
President and Chief Financial Officer, NIKE, Inc. “As we deliver a
relentless flow of innovation and scale NIKE’s digital advantage,
we are positioned for even greater competitive separation and
long-term shareholder value creation.”**
Second Quarter Income Statement Review
- Revenues for NIKE, Inc. increased 10 percent to $10.3
billion, up 13 percent on a currency-neutral basis.
- Revenues for the NIKE Brand were $9.8 billion, up 12 percent on
a currency-neutral basis driven by growth across wholesale and NIKE
Direct; key categories including Sportswear, the Jordan Brand and
Running, and continued growth across footwear and apparel.
- Revenues for Converse were $480 million, up 15 percent on a
currency-neutral basis, mainly driven by double-digit growth in
Asia and Europe, as well as through digital globally.
- Gross margin increased 20 basis points to 44.0 percent
primarily due to higher average selling prices and margin expansion
in NIKE Direct and Converse, partially offset by impacts from
higher product costs, primarily due to incremental tariffs in North
America.
- Selling and administrative expense increased 6 percent
to $3.3 billion. Demand creation expense was $881 million, down 3
percent due primarily to a timing shift of investment in certain
brand campaigns. Operating overhead expense increased 9 percent to
$2.4 billion driven by continued investments in transformational
capabilities, particularly in NIKE Direct and global
operations.
- The effective tax rate was 10.7 percent, compared to 15
percent for the same period last year, primarily due to a more
favorable impact from stock-based compensation.
- Net income increased 32 percent to $1.1 billion driven
primarily by strong revenue growth, gross margin expansion, selling
and administrative expense leverage and a lower tax rate, while
diluted earnings per share increased 35 percent to $0.70
reflecting a nearly 2 percent decline in the weighted average
diluted common shares outstanding.
November 30, 2019 Balance Sheet Review
- Inventories for NIKE, Inc. were $6.2 billion, up 15
percent compared to the prior year period, reflecting strong
consumer demand globally as well as a higher rate of on-time
factory deliveries, and to a lesser extent, the impact from changes
in foreign currency exchange rates.
- Cash and equivalents and short-term investments were
$3.5 billion, $539 million lower than last year as share
repurchases, dividends, and investments in infrastructure more than
offset proceeds from net income.
Share Repurchases
During the second quarter, NIKE, Inc. repurchased 10.1 million
shares for approximately $922 million as part of the four-year, $15
billion program approved by the Board of Directors in June 2018. As
of November 30, 2019, a total of 33.6 million shares had been
repurchased under this program for approximately $2.9 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on December 19, 2019, to review fiscal
second quarter results. The conference call will be broadcast live
via 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, January 9, 2020.
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. Converse, a wholly-owned NIKE, Inc. subsidiary
brand, designs, markets and distributes athletic 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.
*
See additional information in the
accompanying Divisional Revenues table regarding this non-GAAP
financial measure.
**
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 U.S. Securities and Exchange Commission (SEC),
including Forms 8-K, 10-Q and 10-K.
(Tables Follow)
NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED % SIX MONTHS
ENDED % (In millions, except per share data)
11/30/2019 11/30/2018 Change 11/30/2019
11/30/2018 Change Revenues
$
10,326
$
9,374
10
%
$
20,986
$
19,322
9
%
Cost of sales
5,782
5,269
10
%
11,571
10,820
7
%
Gross profit
4,544
4,105
11
%
9,415
8,502
11
%
Gross margin
44.0
%
43.8
%
44.9
%
44.0
%
Demand creation expense
881
910
-3
%
1,899
1,874
1
%
Operating overhead expense
2,443
2,232
9
%
4,753
4,331
10
%
Total selling and administrative expense
3,324
3,142
6
%
6,652
6,205
7
%
% of revenues
32.2
%
33.5
%
31.7
%
32.1
%
Interest expense (income), net
12
14
—
27
25
—
Other (income) expense, net
(41
)
(48
)
—
(74
)
5
—
Income before income taxes
1,249
997
25
%
2,810
2,267
24
%
Income tax expense
134
150
-11
%
328
328
0
%
Effective tax rate
10.7
%
15.0
%
11.7
%
14.5
%
NET INCOME
$
1,115
$
847
32
%
$
2,482
$
1,939
28
%
Earnings per common share: Basic
$
0.71
$
0.54
31
%
$
1.59
$
1.22
30
%
Diluted
$
0.70
$
0.52
35
%
$
1.56
$
1.19
31
%
Weighted average common shares outstanding: Basic
1,560.6
1,581.4
1,561.5
1,587.7
Diluted
1,594.4
1,620.7
1,596.0
1,627.2
Dividends declared per common share
$
0.245
$
0.22
$
0.465
$
0.42
NIKE, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited)
November 30,
November 30,
(Dollars in millions)
2019
2018
% Change
ASSETS Current assets: Cash and equivalents
$
3,070
$
3,423
-10
%
Short-term investments
432
618
-30
%
Accounts receivable, net
4,792
4,346
10
%
Inventories
6,199
5,388
15
%
Prepaid expenses and other current assets
1,876
1,791
5
%
Total current assets
16,369
15,566
5
%
Property, plant and equipment, net
4,668
4,588
2
%
Operating lease right-of-use assets, net
2,882
—
—
Identifiable intangible assets, net
277
284
-2
%
Goodwill
224
154
45
%
Deferred income taxes and other assets
2,182
2,085
5
%
TOTAL ASSETS
$
26,602
$
22,677
17
%
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt
$
6
$
6
0
%
Notes payable
300
9
—
Accounts payable
2,627
2,574
2
%
Current portion of operating lease liabilities
431
—
—
Accrued liabilities
4,672
4,478
4
%
Income taxes payable
228
211
8
%
Total current liabilities
8,264
7,278
14
%
Long-term debt
3,462
3,466
0
%
Operating lease liabilities
2,723
—
—
Deferred income taxes and other liabilities
2,802
3,204
-13
%
Redeemable preferred stock
—
—
—
Shareholders' equity
9,351
8,729
7
%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
26,602
$
22,677
17
%
NIKE, Inc. DIVISIONAL REVENUES (Unaudited)
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED
%
Currency
SIX MONTHS ENDED
%
Currency
(Dollars in millions)
11/30/2019
11/30/2018
Change
Changes1
11/30/2019
11/30/2018
Change
Changes1
North America Footwear
$
2,426
$
2,245
8
%
8
%
$
5,095
$
4,800
6
%
6
%
Apparel
1,417
1,405
1
%
1
%
2,848
2,812
1
%
1
%
Equipment
139
132
5
%
6
%
332
315
5
%
5
%
Total
3,982
3,782
5
%
5
%
8,275
7,927
4
%
4
%
Europe, Middle East & Africa Footwear
1,536
1,419
8
%
12
%
3,294
3,061
8
%
12
%
Apparel
897
794
13
%
17
%
1,766
1,624
9
%
13
%
Equipment
104
100
4
%
8
%
250
235
6
%
11
%
Total
2,537
2,313
10
%
14
%
5,310
4,920
8
%
13
%
Greater China Footwear
1,247
1,022
22
%
26
%
2,411
1,980
22
%
26
%
Apparel
563
490
15
%
18
%
1,028
870
18
%
23
%
Equipment
37
32
16
%
20
%
87
73
19
%
25
%
Total
1,847
1,544
20
%
23
%
3,526
2,923
21
%
25
%
Asia Pacific & Latin America Footwear
997
879
13
%
19
%
1,927
1,760
9
%
15
%
Apparel
410
360
14
%
18
%
766
692
11
%
17
%
Equipment
61
59
3
%
9
%
120
116
3
%
10
%
Total
1,468
1,298
13
%
18
%
2,813
2,568
10
%
15
%
Global Brand Divisions2
10
9
11
%
6
%
16
25
-36
%
-36
%
TOTAL NIKE BRAND
9,844
8,946
10
%
12
%
19,940
18,363
9
%
11
%
Converse
480
425
13
%
15
%
1,035
952
9
%
11
%
Corporate3
2
3
—
—
11
7
—
—
TOTAL NIKE, INC. REVENUES
$
10,326
$
9,374
10
%
13
%
$
20,986
$
19,322
9
%
11
%
TOTAL NIKE BRAND Footwear
$
6,206
$
5,565
12
%
14
%
$
12,727
$
11,601
10
%
13
%
Apparel
3,287
3,049
8
%
10
%
6,408
5,998
7
%
9
%
Equipment
341
323
6
%
8
%
789
739
7
%
10
%
Global Brand Divisions2
10
9
11
%
6
%
16
25
-36
%
-36
%
TOTAL NIKE BRAND REVENUES
$
9,844
$
8,946
10
%
12
%
$
19,940
$
18,363
9
%
11
%
1 The percent 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. 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 the Company's central
foreign exchange risk management program.
NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES1 (Unaudited)
THREE MONTHS ENDED % SIX MONTHS ENDED %
(Dollars in millions)
11/30/2019 11/30/2018
Change 11/30/2019 11/30/2018 Change
North America
$
875
$
884
-1
%
$
1,975
$
1,961
1
%
Europe, Middle East & Africa
510
450
13
%
1,119
951
18
%
Greater China
694
561
24
%
1,363
1,063
28
%
Asia Pacific & Latin America
377
321
17
%
718
644
11
%
Global Brand Divisions2
(872
)
(826
)
-6
%
(1,729
)
(1,644
)
-5
%
TOTAL NIKE BRAND1
1,584
1,390
14
%
3,446
2,975
16
%
Converse
90
44
105
%
228
142
61
%
Corporate3
(413
)
(423
)
2
%
(837
)
(825
)
-1
%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1
1,261
1,011
25
%
2,837
2,292
24
%
Interest expense (income), net
12
14
—
27
25
—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
$
1,249
$
997
25
%
$
2,810
$
2,267
24
%
1 The Company evaluates the 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. Total NIKE Brand EBIT
and Total NIKE, Inc. EBIT are considered non-GAAP financial
measures and are being provided as management believes this
additional information should be considered when assessing the
Company's underlying business performance and trends. References to
EBIT should not be considered in isolation or as a substitute for
other financial measures calculated and presented in accordance
with U.S. GAAP and may not be comparable to similarly titled
non-GAAP measures used by other companies. 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 primarily
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/20191219005745/en/
Investor Contact: Matt Friend (503)
532-4213
Media Contact: Mark Rhodes (503)
532-8877
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