- Revenues up 8 percent to $9.1 billion;
10 percent growth excluding currency changes*
- Diluted earnings per share up 9% to
$0.73 compared to prior year
- Worldwide futures orders up 5 percent;
7 percent growth excluding currency changes
- Inventories as of August 31, 2016 up 11
percent
NIKE, Inc. (NYSE:NKE) today reported fiscal 2017 financial
results for its first quarter ended August 31, 2016. Strong global
demand drove double-digit currency-neutral revenue growth
internationally in the first quarter and six percent revenue growth
in North America.
Diluted earnings per share for the quarter were $0.73, up 9
percent driven by strong revenue growth, operating overhead
leverage, a lower effective tax rate and a lower average share
count partially offset by a gross margin decline and higher demand
creation expense in an Olympic quarter.
“Fueled by an incredible summer of sport, NIKE delivered strong
global growth—and led the industry through disruptive innovation,”
said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Q1 also
showed how we’re amplifying every category through sports style
innovation, transforming retail by connecting the digital and
physical experience and ushering in a new Era of Personalized
Performance – through product, consumer connections and our supply
chain. NIKE’s strategic investments in these growth opportunities
continue to deliver long-term value to our shareholders.”**
First Quarter Income Statement Review
- Revenues for NIKE, Inc. rose 8
percent to $9.1 billion, up 10 percent on a currency-neutral basis.
- Revenues for the NIKE Brand were $8.5
billion, up 10 percent on a currency-neutral basis driven by
double-digit growth in Greater China, Western Europe, Emerging
Markets, Central & Eastern Europe and Japan, including strong
growth in Sportswear, Running and the Jordan Brand.
- Revenues for Converse were $574
million, up 4 percent on a currency-neutral basis, mainly driven by
growth in North America which was slightly offset by declines in
Europe and Asia Pacific.
- Gross margin declined 200 basis
points to 45.5 percent as higher average selling prices were more
than offset by several temporary or discrete items including
foreign exchange, a shift of expenses from Operating Overhead to
Cost of Goods Sold, a higher off-price mix and the impact of
exiting the Golf equipment business.
- Selling and administrative
expense increased 12 percent to $2.9 billion. Demand creation
expense was $1.0 billion, up 25 percent, reflecting investments in
key sports events. Operating overhead expense increased 6 percent
to $1.9 billion, reflecting continued growth in the
Direct-to-Consumer (DTC) business, and targeted investments in
operational infrastructure and consumer-focused digital
capabilities.
- Other income, net was $62
million, primarily comprised of net foreign currency 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 exchange
rates on the translation of foreign currency-denominated profits,
increased pretax income by approximately $3 million.
- The effective tax rate was 2.5
percent, compared to 18.4 percent for the same period last year,
primarily due to a one-time benefit related to the resolution with
the U.S. Internal Revenue Service of a foreign tax credit
matter.
- Net income increased 6 percent
to $1.2 billion as revenue growth and a lower effective tax rate
more than offset lower gross margin and higher demand creation
expense, while diluted earnings per share increased 9
percent from the prior year to $0.73 reflecting nearly a 3 percent
decline in the weighted average diluted common shares
outstanding.
August 31, 2016 Balance Sheet Review
- Inventories for NIKE, Inc. were
$4.9 billion, up 11 percent from August 31, 2015, driven by a 3
percent increase in NIKE Brand wholesale unit inventories,
increases in average product cost per unit, and growth in the DTC
business.
- Cash and short-term investments
were $4.8 billion, $621 million lower than last year as growth in
net income and proceeds from the issuance of debt in the second
quarter of fiscal 2016 were more than offset by share repurchases,
investments in working capital and infrastructure, higher
dividends, and a reduction in collateral received from
counterparties to foreign currency hedging instruments.
Share Repurchases
During the first quarter, NIKE, Inc. repurchased a total of 19.0
million shares for approximately $1.1 billion as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of August 31, 2016, a total of 39.0 million
shares had been repurchased under this program for approximately
$2.2 billion.
Futures Orders
As of August 31, 2016, worldwide futures orders for NIKE Brand
athletic footwear and apparel scheduled for delivery from September
2016 through January 2017 totaled $12.3 billion, 5 percent higher
than orders reported for the same period last year, and 7 percent
higher on a currency-neutral basis.**
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on September 27, 2016, 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 4, 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 Inc., which designs, markets and distributes
athletic lifestyle footwear, apparel and accessories; and Hurley
International LLC, 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.
Some forward-looking statements in this release concern changes in
futures orders that are not necessarily indicative of changes in
total revenues for subsequent periods due to the mix of futures,
“at once” and closeout orders, exchange rate fluctuations, order
cancellations, discounts and returns, which may vary significantly
from quarter to quarter, and because a portion of the business does
not report futures orders.
NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS
ENDED % (Dollars in millions, except per share data)
8/31/2016
8/31/2015 Change Revenues $
9,061 $ 8,414 8 % Cost of sales 4,938
4,419 12 % Gross profit 4,123
3,995 3 % Gross margin 45.5 % 47.5 % Demand creation expense
1,041 832 25 % Operating overhead expense 1,856
1,745 6 % Total
selling and administrative expense 2,897 2,577 12 % % of revenue
32.0 % 30.6 % Interest expense (income), net 7 4 — Other
(income) expense, net (62 ) (31
) — Income before income taxes 1,281 1,445 -11
% Income tax expense 32
266 -88 % Effective tax rate 2.5 % 18.4 %
NET INCOME $ 1,249
$ 1,179 6 %
Earnings per common share: Basic $ 0.75 $ 0.69 9 % Diluted $ 0.73 $
0.67 9 % Weighted average common shares outstanding: Basic
1,672.0 1,709.0 Diluted 1,708.9 1,754.5 Dividends declared
per common share $ 0.16 $ 0.14
NIKE, Inc. CONSOLIDATED BALANCE SHEETS
August 31, August 31,
(Dollars in millions)
2016 2015
% Change
ASSETS Current assets: Cash and equivalents $ 2,659 $ 3,246 -18%
Short-term investments 2,128 2,162 -2% Accounts receivable, net
3,526 3,288 7% Inventories 4,896 4,414 11% Prepaid expenses and
other current assets 1,380 1,751
-21% Total current assets 14,589 14,861 -2% Property,
plant and equipment, net 3,572 3,112 15% Identifiable intangible
assets, net 284 281 1% Goodwill 139 131 6% Deferred income taxes
and other assets1 2,572 2,376
8%
TOTAL ASSETS $ 21,156
$ 20,761 2%
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 44 $ 106 -58% Notes payable 22 23 -4%
Accounts payable 2,088 1,933 8% Accrued liabilities1 3,147 3,142 0%
Income taxes payable 62 75
-17% Total current liabilities 5,363 5,279 2%
Long-term debt 1,993 1,072 86% Deferred income taxes and other
liabilities1 1,635 1,516 8% Redeemable preferred stock — — —
Shareholders' equity 12,165
12,894 -6%
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 21,156 $
20,761 2% 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 Excluding
THREE MONTHS ENDED %
Currency
(Dollars in millions)
8/31/2016
8/31/2015 Change
Changes1
North America Footwear $ 2,518 $ 2,366 6 % 7 % Apparel 1,317
1,247 6 % 6 % Equipment 196 186
5 % 5 % Total 4,031 3,799 6 % 6
%
Western Europe Footwear 1,147 1,128 2 % 4 % Apparel 531
434 22 % 26 % Equipment 85 79
8 % 10 % Total 1,763 1,641 7 %
10 %
Central & Eastern Europe Footwear 270 238 13 % 19 %
Apparel 138 133 4 % 12 % Equipment 32
30 7 % 16 % Total 440 401
10 % 16 %
Greater China Footwear 710 599 19 % 25 % Apparel
269 246 9 % 15 % Equipment 41 41
0 % 4 % Total 1,020 886 15 % 21
%
Japan Footwear 166 122 36 % 17 % Apparel 60 43 40 % 21 %
Equipment 19 14
36 % 12 % Total 245 179 37 % 18 %
Emerging
Markets Footwear 661 670 -1 % 12 % Apparel 234 238 -2 % 12 %
Equipment 50 58
-14 % -2 % Total 945 966 -2 % 11 %
Global
Brand Divisions2 15
26 -42 % -30 %
Total NIKE
Brand 8,459 7,898
7 % 10 % Converse 574 555 3 % 4 %
Corporate3 28 (39 )
— —
Total NIKE, Inc.
Revenues $ 9,061 $ 8,414
8 % 10 %
Total NIKE Brand
Footwear $ 5,472 $ 5,123 7 % 10 % Apparel 2,549 2,341 9 % 12 %
Equipment 423 408 4 % 6 % Global Brand Divisions2 15
26 -42 %
-30 %
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 % (Dollars in millions)
8/31/2016
8/31/2015 Change North America $
1,004 $ 1,042 -4 % Western Europe 392 485 -19 % Central &
Eastern Europe 81 98 -17 % Greater China 371 330 12 % Japan 50 36
39 % Emerging Markets 171 258 -34 % Global Brand Divisions2
(771 ) (624 ) -24 %
TOTAL NIKE BRAND 1,298
1,625 -20 %
Converse 153 147 4 % Corporate3 (163 )
(323 ) 50 %
TOTAL EARNINGS BEFORE INTEREST
AND TAXES 1,288
1,449 -11 %
Interest expense (income), net 7
4 —
TOTAL INCOME BEFORE INCOME
TAXES $ 1,281
$ 1,445 -11 %
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.
NIKE, Inc. NIKE BRAND
REPORTED FUTURES GROWTH BY GEOGRAPHY1 As of Aug 31, 2016
Reported Futures
Excluding Currency
Orders
Changes2
North America 1% 1% Western Europe 4% 9% Central & Eastern
Europe 9% 9% Greater China 15% 19% Japan 26% 11% Emerging Markets
6% 10%
Total NIKE Brand Reported
Futures 5% 7% 1 Futures orders for NIKE
Brand footwear and apparel scheduled for delivery from September
2016 through January 2017. NIKE Brand reported futures include (1)
orders from external wholesale customers and (2) internal orders
from our DTC in-line stores and e-commerce operations which are
reflected at prices that are comparable to prices charged to
external wholesale customers. The U.S. Dollar futures orders amount
is calculated based upon our internal forecast of the currency
exchange rates under which our revenues will be translated during
this period. The reported futures orders growth is not
necessarily indicative of our expectation of revenue growth during
this period. This is due to year-over-year changes in shipment
timing, changes in the mix of orders between futures and at-once
orders, and because the fulfillment of certain orders may fall
outside of the schedule noted above. In addition, exchange rate
fluctuations as well as differing levels of order cancellations,
discounts and returns can cause differences in the comparisons
between futures orders and actual revenues. Moreover, a portion of
our revenue is not derived from futures orders, including sales of
at-once and closeout NIKE Brand footwear and apparel, all sales of
NIKE Brand equipment, the difference between retail sales and
internal orders from our DTC in-line stores and e-commerce
operations, and sales from Converse, NIKE Golf and Hurley.
2 Reported futures have been restated
using prior year exchange rates for the comparative period to
enhance the visibility of the underlying business trends, excluding
the impact of foreign currency exchange rate fluctuations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160927006645/en/
NIKE, Inc.Investor Contact:Nitesh
Sharan, 503-532-2828orMedia
Contact:Kellie Leonard, 503-671-6171
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