- Revenues up 5 percent to $8.4 billion;
7 percent growth on a currency-neutral basis*
- Diluted earnings per share up 24
percent to $0.68
- Inventories up 7 percent as of February
28, 2017
NIKE, Inc. (NYSE:NKE) today reported financial results for its
fiscal 2017 third quarter ended February 28, 2017. Consumer demand
in all geographies drove revenue growth across the NIKE Brand
portfolio. Diluted earnings per share were up 24 percent and grew
faster than revenue, primarily due to selling and administrative
expense leverage, higher other income (net), a lower effective tax
rate and a lower average share count.
“The power of NIKE’s diverse, global portfolio delivered another
solid quarter of growth and profitability,” said Mark Parker,
Chairman, President and CEO, NIKE, Inc. “To expand our leadership
and ignite NIKE’s next phase of growth, we’re delivering a
relentless flow of innovation through performance and style,
increasing speed throughout the business and creating more direct
connections with consumers leveraging digital and
membership.”**
Third Quarter Income Statement Review
- Revenues for NIKE, Inc.
increased 5 percent to $8.4 billion, up 7 percent on a
currency-neutral basis.
- Revenues for the NIKE Brand were $7.9
billion, up 7 percent on a currency-neutral basis, driven by
double-digit growth in Western Europe, Greater China and the
Emerging Markets as well as the Sportswear and Jordan Brand
categories.
- Revenues for Converse were $498
million, up 3 percent on a currency-neutral basis, driven by growth
in North America.
- Gross margin contracted 140
basis points to 44.5 percent, as higher average selling prices were
more than offset by higher product costs, unfavorable changes in
foreign exchange rates and the impact of higher off-price
sales.
- Selling and administrative
expense decreased 3 percent to $2.5 billion. Demand creation
expense was $749 million, down 7 percent as fiscal 2017 spend was
weighted towards the first six months due to significant
investments around the Olympics and the European Championships.
Operating overhead expense decreased 1 percent to $1.7 billion, as
continued investments in Direct-to-Consumer (DTC) were offset by
lower bad debt expense compared to the prior year and lower
administrative costs as Edit-to-Amplify initiatives are driving
productivity in core operational spending.
- Other income, net was $88
million comprised primarily of net foreign currency exchange gains,
and to a lesser extent, non-operating items.
- The effective tax rate was 13.8
percent, compared to 16.3 percent for the same period last year,
primarily due to a reduction in tax reserves and an increase in the
mix of earnings from operations outside of the U.S., which are
generally subject to a lower tax rate.
- Net income increased 20 percent
to $1.1 billion and diluted earnings per share increased 24
percent to $0.68 as revenue growth, selling and administrative
expense leverage, higher other income (net), a lower tax rate and a
three percent decline in the weighted average diluted common shares
outstanding more than offset lower gross margin.
February 28, 2017 Balance Sheet Review
- Inventories for NIKE, Inc. were
$4.9 billion, up 7 percent compared to the prior year as a 3
percent decrease in NIKE Brand wholesale unit inventories was
offset by increases in average product costs per unit and higher
inventories associated with growth in DTC.
- Cash and short-term investments
were $6.2 billion, $1.1 billion higher than the prior year as
growth in net income and proceeds from the issuance of debt in the
second quarter of fiscal 2017 as well as proceeds from employee
exercises of stock options more than offset share repurchases,
higher dividends and investments in infrastructure.
Share Repurchases
During the third quarter, NIKE, Inc. repurchased a total of 8.9
million shares for approximately $475 million as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of February 28, 2017, a total of 64.9 million
shares had been repurchased under this program for approximately
$3.6 billion.
Futures Orders
Worldwide futures orders for the NIKE Brand will be referenced
on our earnings conference calls as deemed appropriate. NIKE Brand
and geography Futures Orders growth versus the prior year will be
posted on the NIKE, Inc. Investor Relations website at
http://investors.NIKE.com following the call.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on March 21, 2017, to review fiscal
third 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, March 28, 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 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.
NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS
ENDED % NINE MONTHS ENDED % (Dollars in
millions, except per share data)
2/28/2017
2/29/2016 Change
2/28/2017
2/29/2016 Change Revenues $ 8,432 $
8,032 5 % $ 25,673 $ 24,132 6 % Cost of sales 4,682
4,343 8 %
14,184 12,947 10 % Gross profit
3,750 3,689 2 % 11,489 11,185 3 % Gross margin 44.5 % 45.9 % 44.8 %
46.3 % Demand creation expense 749 804 -7 % 2,552 2,405 6 %
Operating overhead expense 1,747
1,762 -1 % 5,346
5,298 1 % Total selling and administrative
expense 2,496 2,566 -3 % 7,898 7,703 3 % % of revenue 29.6 % 31.9 %
30.8 % 31.9 % Interest expense (income), net 19 5 — 41 14 —
Other (income) expense, net (88 ) (17 )
— (168 ) (82 )
— Income before income taxes 1,323 1,135 17 % 3,718
3,550 5 % Income tax expense 182
185 -2 % 486
636 -24 % Effective tax rate 13.8 % 16.3 %
13.1 % 17.9 %
NET INCOME
$ 1,141 $ 950
20 % $
3,232 $ 2,914
11 % Earnings per common share: Basic $ 0.69 $
0.56 23 % $ 1.95 $ 1.71 14 % Diluted $ 0.68 $ 0.55 24 % $ 1.91 $
1.67 14 % Weighted average common shares outstanding: Basic
1,653.1 1,693.8 1,661.5 1,703.2 Diluted 1,686.3 1,737.3 1,696.4
1,748.5 Dividends declared per common share $ 0.18
$ 0.16 $ 0.52
$ 0.46
NIKE, Inc. CONSOLIDATED BALANCE
SHEETS February 28, February 29,
(Dollars in millions)
2017 2016
% Change
ASSETS Current assets: Cash and equivalents $ 4,021 $ 3,044 32 %
Short-term investments 2,139 2,062 4 % Accounts receivable, net
3,752 3,368 11 % Inventories 4,932 4,590 7 % Prepaid expenses and
other current assets 1,361 1,782
-24 % Total current assets 16,205 14,846 9 %
Property, plant and equipment, net 3,793 3,329 14 % Identifiable
intangible assets, net 283 281 1 % Goodwill 139 131 6 % Deferred
income taxes and other assets1 2,732
2,381 15 %
TOTAL ASSETS $
23,152 $ 20,968
10 % LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Current portion of long-term debt $ 6 $ 7 -14 % Notes
payable 23 — 100 % Accounts payable 1,938 1,714 13 % Accrued
liabilities1 3,228 3,223 0 % Income taxes payable 76
35 117 % Total current
liabilities 5,271 4,979 6 % Long-term debt 3,472 2,031 71 %
Deferred income taxes and other liabilities1 1,687 1,658 2 %
Redeemable preferred stock — — — Shareholders' equity
12,722 12,300 3 %
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY $
23,152 $ 20,968
10 % 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
% Change
Excluding
Excluding
THREE MONTHS ENDED %
Currency
NINE MONTHS ENDED %
Currency
(Dollars in millions)
2/28/2017
2/29/2016 Change
Changes1
2/28/2017 2/29/2016
Change
Changes1
North America Footwear $ 2,490 $ 2,404 4 % 3 % $ 7,227 $
6,932 4 % 4 % Apparel 1,154 1,115 3 % 3 % 3,744 3,583 4 % 4 %
Equipment 138 164 -16 %
-16 % 492 514 -4 %
-4 % Total 3,782 3,683 3 % 3 % 11,463 11,029 4 % 4 %
Western Europe Footwear 990 985 1 % 6 % 3,002 2,958 1 % 6 %
Apparel 445 392 14 % 21 % 1,430 1,217 18 % 23 % Equipment
64 65 -2 % 5 %
215 207 4 % 9 % Total
1,499 1,442 4 % 10 % 4,647 4,382 6 % 11 %
Central & Eastern
Europe Footwear 232 237 -2 % 1 % 694 658 5 % 9 % Apparel 110
102 8 % 8 % 368 361 2 % 5 % Equipment 20
20 0 % 0 % 68
67 1 % 6 % Total 362 359 1 % 3 % 1,130
1,086 4 % 7 %
Greater China Footwear 776 719 8 % 14 % 2,155
1,918 12 % 18 % Apparel 271 235 15 % 22 % 895 787 14 % 19 %
Equipment 28 28 0 %
7 % 100 101 -1 %
4 % Total 1,075 982 9 % 15 % 3,150 2,806 12 % 18 %
Japan Footwear 153 133 15 % 8 % 470 383 23 % 8 % Apparel 67
52 29 % 21 % 197 158 25 % 10 % Equipment 16
20 -20 % -24 % 52
48 8 % -4 % Total 236 205 15 % 8 % 719
589 22 % 8 %
Emerging Markets Footwear 673 596 13 % 17 %
2,060 1,940 6 % 15 % Apparel 222 228 -3 % 3 % 719 721 0 % 8 %
Equipment 55 55 0 %
2 % 163 168 -3 %
3 % Total 950 879 8 % 13 % 2,942 2,829 4 % 12 %
Global
Brand Divisions2 19 17
12 % 12 % 55 61
-10 % -10 %
Total NIKE Brand
7,923 7,567 5 % 7 %
24,106 22,782 6 %
8 % Converse 498 489 2 % 3 % 1,488 1,442 3 % 4 % Corporate3
11 (24 ) — —
79 (92 ) — —
Total NIKE, Inc. Revenues $ 8,432 $
8,032 5 % 7 % $ 25,673 $ 24,132
6 % 8 %
Total NIKE Brand
Footwear $ 5,314 $ 5,074 5 % 7 % $ 15,608 $ 14,789 6 % 8 % Apparel
2,269 2,124 7 % 9 % 7,353 6,827 8 % 10 % Equipment 321 352 -9 % -7
% 1,090 1,105 -1 % 1 % Global Brand Divisions2 19
17 12 % 12 % 55
61 -10 % -10 %
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 % NINE MONTHS ENDED
% (Dollars in millions)
2/28/2017
2/29/2016 Change
2/28/2017 2/29/2016
Change North America $ 980 $ 903 9 % $ 2,896 $
2,827 2 % Western Europe 290 334 -13 % 918 1,126 -18 % Central
& Eastern Europe 57 69 -17 % 196 243 -19 % Greater China 381
358 6 % 1,127 1,015 11 % Japan 49 36 36 % 147 119 24 % Emerging
Markets 193 202 -4 % 601 701 -14 % Global Brand Divisions2
(598 ) (625 ) 4 %
(1,988 ) (1,874 ) -6 %
TOTAL NIKE BRAND
1,352 1,277
6 % 3,897
4,157 -6 %
Converse 109 127 -14 % 340 359 -5 % Corporate3 (119 )
(264 ) 55 % (478 )
(952 ) 50 %
TOTAL EARNINGS BEFORE INTEREST AND
TAXES
1,342 1,140
18 % 3,759
3,564 5 % Interest
expense (income), net 19 5
— 41
14 —
TOTAL INCOME BEFORE INCOME
TAXES
$ 1,323 $ 1,135
17 % $
3,718 $ 3,550
5 % 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170321006511/en/
NIKE, Inc.Investor Contact:Nitesh
Sharan, 503-532-2828orMedia
Contact:Kellie Leonard, 503-671-6171
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