NKE

NIKE, Inc. (NYSE:NKE) today reported fiscal 2023 financial results for its second quarter ended November 30, 2022.

• Second quarter reported revenues were $13.3 billion, up 17 percent compared to the prior year and up 27 percent on a currency-neutral basis*
• NIKE Direct sales were $5.4 billion, up 16 percent on a reported basis and up 25 percent on a currency-neutral basis
• NIKE Brand Digital sales increased 25 percent on a reported basis, or 34 percent on a currency-neutral basis
• Wholesale revenues grew 19 percent on a reported basis and 30 percent on a currency-neutral basis
• Gross margin decreased 300 basis points to 42.9 percent
• Diluted earnings per share for the quarter was $0.85, up 2 percent

"NIKE’s results this quarter are a testament to our deep connection with consumers," said John Donahoe, President and CEO, NIKE, Inc. “Our growth was broad-based and was driven by our expanding digital leadership and brand strength. These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum."**

Executive Vice President and Chief Financial Officer, Matthew Friend, said, "Consumer demand for NIKE's portfolio of brands continues to drive strong business momentum in a dynamic environment. We remain focused on what we can control, and we are on track to deliver on our operational and financial goals — setting the foundation for sustainable, profitable growth."**

Second Quarter Income Statement Review

• Revenues for NIKE, Inc. increased 17 percent to $13.3 billion compared to the prior year and were up 27 percent on a currency-neutral basis.
  • Revenues for the NIKE Brand were $12.7 billion, up 18 percent on a reported basis and up 28 percent on a currency-neutral basis, with strong growth across all geographies and channels.
  • Revenues for Converse were $586 million, up 5 percent on a reported basis and up 12 percent on a currency-neutral basis, led by double-digit growth in North America, partially offset by declines in Asia.
• Gross margin decreased 300 basis points to 42.9 percent, primarily due to higher markdowns to liquidate inventory, particularly in North America; continued unfavorable changes in net foreign currency exchange rates; elevated freight and logistics costs and increased product input costs; partially offset by strategic pricing actions.
• Selling and administrative expense increased 10 percent to $4.1 billion.
  • Demand creation expense was $1.1 billion, up 8 percent, primarily due to advertising and marketing.
  • Operating overhead expense increased 10 percent to $3.0 billion, primarily due to wage-related expenses, strategic technology investments and higher NIKE Direct costs.
• The effective tax rate for the quarter was 19.3 percent compared to 10.9 percent for the same period last year due to decreased benefits from stock-based compensation and a shift in our earnings mix.
• Net income was $1.3 billion, flat compared to prior year, and Diluted earnings per share was $0.85, increasing 2 percent.

November 30, 2022 Balance Sheet Review

• Inventories for NIKE, Inc. were $9.3 billion, up 43 percent compared to the prior year period, driven by an increase in units from lapping prior year supply chain disruption, as well as higher input costs.
• Cash and equivalents and short-term investments were $10.6 billion, down approximately $4.5 billion from last year, as free cash flow was offset by share repurchases and cash dividends.

Shareholder Returns

NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 21 consecutive years of increasing dividend payouts. In the second quarter, NIKE returned approximately $2.1 billion to shareholders, including:

• Dividends of $480 million, up 10 percent from the prior year.
• Share repurchases of $1.6 billion, reflecting 16.5 million retired shares as part of the four-year, $18 billion program approved by the Board of Directors in June 2022. As of November 30, 2022, a total of 19.0 million shares have been repurchased under the program for a total of approximately $1.9 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2022, 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 approximately 9:00 p.m. PT, January 9, 2023.

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://about.nike.com/en/newsroom and 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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

NIKE, Inc.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

(In millions, except per share data)

THREE MONTHS ENDED

%

SIX MONTHS ENDED

%

11/30/2022

11/30/2021

Change

11/30/2022

11/30/2021

Change

Revenues

$

13,315

 

$

11,357

 

17%

$

26,002

 

$

23,605

 

10%

Cost of sales

 

7,604

 

 

6,144

 

24%

 

14,676

 

 

12,696

 

16%

Gross profit

 

5,711

 

 

5,213

 

10%

 

11,326

 

 

10,909

 

4%

Gross margin

 

42.9

%

 

45.9

%

 

 

43.6

%

 

46.2

%

 

 

 

 

 

 

 

 

Demand creation expense

 

1,102

 

 

1,017

 

8%

 

2,045

 

 

1,935

 

6%

Operating overhead expense

 

3,022

 

 

2,742

 

10%

 

5,999

 

 

5,396

 

11%

Total selling and administrative expense

 

4,124

 

 

3,759

 

10%

 

8,044

 

 

7,331

 

10%

% of revenues

 

31.0

%

 

33.1

%

 

 

30.9

%

 

31.1

%

 

 

 

 

 

 

 

 

Interest expense (income), net

 

16

 

 

55

 

—

 

29

 

 

112

 

—

Other (income) expense, net

 

(79

)

 

(102

)

—

 

(225

)

 

(141

)

—

Income before income taxes

 

1,650

 

 

1,501

 

10%

 

3,478

 

 

3,607

 

-4%

Income tax expense

 

319

 

 

164

 

95%

 

679

 

 

396

 

71%

Effective tax rate

 

19.3

%

 

10.9

%

 

 

19.5

%

 

11.0

%

 

 

 

 

 

 

 

 

NET INCOME

$

1,331

 

$

1,337

 

0%

$

2,799

 

$

3,211

 

-13%

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

Basic

$

0.85

 

$

0.84

 

1%

$

1.79

 

$

2.03

 

-12%

Diluted

$

0.85

 

$

0.83

 

2%

$

1.77

 

$

1.98

 

-11%

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

1,559.0

 

 

1,582.4

 

 

 

1,563.1

 

 

1,582.2

 

 

Diluted

 

1,572.4

 

 

1,617.4

 

 

 

1,579.1

 

 

1,618.5

 

 

 

 

 

 

 

 

 

Dividends declared per common share

$

0.340

 

$

0.305

 

 

$

0.645

 

$

0.580

 

 

NIKE, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

(Dollars in millions)

November 30,

November 30,

% Change

2022

2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and equivalents

$

6,490

$

10,751

-40%

Short-term investments

 

4,131

 

 

4,352

 

-5%

Accounts receivable, net

 

5,437

 

 

3,746

 

45%

Inventories

 

9,326

 

 

6,506

 

43%

Prepaid expenses and other current assets

 

2,063

 

 

1,822

 

13%

Total current assets

 

27,447

 

 

27,177

 

1%

Property, plant and equipment, net

 

4,854

 

 

4,812

 

1%

Operating lease right-of-use assets, net

 

2,809

 

 

3,017

 

-7%

Identifiable intangible assets, net

 

280

 

 

265

 

6%

Goodwill

 

281

 

 

242

 

16%

Deferred income taxes and other assets

 

3,976

 

 

3,404

 

17%

TOTAL ASSETS

$

39,647

 

$

38,917

 

2%

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

500

 

$

—

 

—

Notes payable

 

7

 

 

9

 

-22%

Accounts payable

 

2,810

 

 

2,795

 

1%

Current portion of operating lease liabilities

 

426

 

 

462

 

-8%

Accrued liabilities

 

6,020

 

 

5,431

 

11%

Income taxes payable

 

436

 

 

160

 

173%

Total current liabilities

 

10,199

 

 

8,857

 

15%

Long-term debt

 

8,924

 

 

9,417

 

-5%

Operating lease liabilities

 

2,668

 

 

2,835

 

-6%

Deferred income taxes and other liabilities

 

2,584

 

 

2,884

 

-10%

Redeemable preferred stock

 

—

 

 

—

 

—

Shareholders’ equity

 

15,272

 

 

14,924

 

2%

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

39,647

 

$

38,917

 

2%

NIKE, Inc.

DIVISIONAL REVENUES

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% Change

Excluding

Currency

Changes1

 

 

 

% Change

Excluding

Currency

Changes1

(Dollars in millions)

THREE MONTHS ENDED

%

SIX MONTHS ENDED

%

11/30/2022

11/30/2021

Change

11/30/2022

11/30/2021

Change

North America

 

 

 

 

 

 

 

 

Footwear

$

3,963

$

2,852

 

39%

39%

$

7,768

$

6,116

 

27%

27%

Apparel

 

1,685

 

 

1,480

 

14%

14%

 

3,179

 

 

2,910

 

9%

10%

Equipment

 

182

 

 

145

 

26%

26%

 

393

 

 

330

 

19%

19%

Total

 

5,830

 

 

4,477

 

30%

31%

 

11,340

 

 

9,356

 

21%

21%

Europe, Middle East & Africa

 

 

 

 

 

 

 

 

Footwear

 

2,063

 

 

1,806

 

14%

37%

 

4,075

 

 

3,789

 

8%

27%

Apparel

 

1,281

 

 

1,202

 

7%

28%

 

2,434

 

 

2,361

 

3%

22%

Equipment

 

145

 

 

134

 

8%

30%

 

313

 

 

299

 

5%

23%

Total

 

3,489

 

 

3,142

 

11%

33%

 

6,822

 

 

6,449

 

6%

25%

Greater China

 

 

 

 

 

 

 

 

Footwear

 

1,370

 

 

1,235

 

11%

21%

 

2,603

 

 

2,684

 

-3%

4%

Apparel

 

393

 

 

564

 

-30%

-24%

 

767

 

 

1,040

 

-26%

-21%

Equipment

 

25

 

 

45

 

-44%

-39%

 

74

 

 

102

 

-27%

-23%

Total

 

1,788

 

 

1,844

 

-3%

6%

 

3,444

 

 

3,826

 

-10%

-4%

Asia Pacific & Latin America

 

 

 

 

 

 

 

 

Footwear

 

1,108

 

 

887

 

25%

40%

 

2,172

 

 

1,909

 

14%

27%

Apparel

 

435

 

 

402

 

8%

24%

 

848

 

 

787

 

8%

22%

Equipment

 

56

 

 

58

 

-3%

8%

 

114

 

 

116

 

-2%

10%

Total

 

1,599

 

 

1,347

 

19%

34%

 

3,134

 

 

2,812

 

11%

25%

Global Brand Divisions2

 

18

 

 

6

 

200%

200%

 

32

 

 

13

 

146%

149%

TOTAL NIKE BRAND

 

12,724

 

 

10,816

 

18%

28%

 

24,772

 

 

22,456

 

10%

19%

Converse

 

586

 

 

557

 

5%

12%

 

1,229

 

 

1,186

 

4%

10%

Corporate3

 

5

 

 

(16

)

—

—

 

1

 

 

(37

)

—

—

TOTAL NIKE, INC. REVENUES

$

13,315

 

$

11,357

 

17%

27%

$

26,002

 

$

23,605

 

10%

18%

 

 

 

 

 

 

 

 

 

TOTAL NIKE BRAND

 

 

 

 

 

 

 

 

Footwear

$

8,504

 

$

6,780

 

25%

36%

$

16,618

 

$

14,498

 

15%

23%

Apparel

 

3,794

 

 

3,648

 

4%

14%

 

7,228

 

 

7,098

 

2%

10%

Equipment

 

408

 

 

382

 

7%

17%

 

894

 

 

847

 

6%

14%

Global Brand Divisions2

 

18

 

 

6

 

200%

200%

 

32

 

 

13

 

146%

149%

TOTAL NIKE BRAND REVENUES

$

12,724

 

$

10,816

 

18%

28%

$

24,772

 

$

22,456

 

10%

19%

1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period and is provided 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. Management uses this non-GAAP financial measure when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing the Company’s underlying business performance and trends. References to this measure 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 revenues include NIKE Brand licensing and other miscellaneous revenues 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)

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions)

THREE MONTHS ENDED

%

SIX MONTHS ENDED

%

11/30/2022

11/30/2021

Change

11/30/2022

11/30/2021

Change

North America

$

1,497

 

$

1,235

 

21%

$

2,874

 

$

2,669

 

8%

Europe, Middle East & Africa

 

990

 

 

806

 

23%

 

1,965

 

 

1,681

 

17%

Greater China

 

511

 

 

569

 

-10%

 

1,052

 

 

1,270

 

-17%

Asia Pacific & Latin America

 

485

 

 

388

 

25%

 

985

 

 

869

 

13%

Global Brand Divisions2

 

(1,226

)

 

(1,071

)

-14%

 

(2,413

)

 

(2,058

)

-17%

TOTAL NIKE BRAND1

 

2,257

 

 

1,927

 

17%

 

4,463

 

 

4,431

 

1%

Converse

 

153

 

 

132

 

16%

 

362

 

 

336

 

8%

Corporate3

 

(744

)

 

(503

)

-48%

 

(1,318

)

 

(1,048

)

-26%

TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1

 

1,666

 

 

1,556

 

7%

 

3,507

 

 

3,719

 

-6%

EBIT margin1

 

12.5

%

 

13.7

%

 

 

13.5

%

 

15.8

%

 

Interest expense (income), net

 

16

 

 

55

 

—

 

29

 

 

112

 

—

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES

$

1,650

 

$

1,501

 

10%

$

3,478

 

$

3,607

 

-4%

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. EBIT margin is calculated as EBIT divided by total NIKE, Inc. Revenues. Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin are considered non-GAAP financial measures. Management uses these non-GAAP financial measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional information that should be considered when assessing the Company’s underlying business performance and trends. References to EBIT and EBIT margin 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 and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues 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/20221220005681/en/

Investor Contact: Paul Trussell investor.relations@nike.com

Media Contact: KeJuan Wilkins media.relations@nike.com