- Revenues up 5 percent to $8.4 billion;
14 percent growth excluding currency changes
- Diluted earnings per share up 23
percent to $1.34
- Worldwide futures orders up 9 percent;
17 percent growth excluding currency changes
- Inventories as of August 31, 2015 up 10
percent
NIKE, Inc. (NYSE:NKE) today reported financial results for its
first quarter ended August 31, 2015. Diluted earnings per share
increased 23% due to broad-based revenue growth, gross margin
expansion, selling and administrative expense leverage, a lower
effective tax rate and a lower average share count.
“Fiscal 2016 is off to a great start,” said Mark Parker,
President and CEO of NIKE, Inc. “Our relentless pace of growth is
driven by our proven strategy of putting the consumer first,
obsessing innovation in everything we do and leveraging our
powerful portfolio. We’re well-positioned to continue to deliver
long-term growth that is both sustainable and profitable.”*
First Quarter Income Statement Review
- Revenues for NIKE, Inc.
increased 5 percent to $8.4 billion, up 14 percent on a
currency-neutral basis.
- Revenues for the NIKE Brand were $7.9
billion, up 15 percent on a currency-neutral basis driven by growth
in every geography and nearly every key category.
- Revenues for Converse were $555
million, up 3 percent on a currency-neutral basis, mainly driven by
strong growth in the United States, partially offset by a decline
in the United Kingdom.
- Gross margin expanded 90 basis
points to 47.5 percent. The increase was primarily attributable to
higher average selling prices and continued growth in the higher
margin Direct to Consumer (DTC) business, partially offset by
higher product input and warehousing costs.
- Selling and administrative
expense increased 4 percent to $2.6 billion. Demand creation
expense was $832 million, down 7 percent, reflecting favorable
comparisons against higher investment in support of the World Cup
in the first quarter of fiscal 2015. Operating overhead expense
increased 10 percent to $1.7 billion, reflecting continued growth
in the DTC business and targeted investments in infrastructure and
consumer-focused digital capabilities.
- Other income, net was $31
million, comprised primarily 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,
decreased pretax income by approximately $151 million.
- The effective tax rate was 18.4
percent, compared to 21.7 percent for the same period last year,
primarily due to an increase in the proportion of earnings from
operations outside of the United States, which are generally
subject to a lower tax rate, as well as certain non-recurring items
recognized in the quarter.
- Net income increased 23 percent
to $1.2 billion while diluted earnings per share increased
23 percent to $1.34, reflecting strong revenue growth, gross margin
expansion, selling and administrative expense leverage, a lower tax
rate and a decrease in the weighted average diluted common shares
outstanding.
August 31, 2015 Balance Sheet Review
- Inventories for NIKE, Inc. were
$4.4 billion, up 10 percent from August 31, 2014, driven primarily
by an 8 percent increase in NIKE Brand wholesale unit
inventories. Increases in average product cost per unit, as
well as higher inventories associated with growth in DTC, were
largely offset by changes in foreign currency rates.
- Cash and short-term investments
were $5.4 billion, $829 million higher than last year primarily as
a result of growth in net income and collateral received from
counterparties as a result of hedging activities more than
offsetting share repurchases and higher dividends.
Share Repurchases
During the first quarter, NIKE, Inc. repurchased a total of 5.5
million shares for approximately $588 million as part of the
four-year, $8.0 billion program approved by the Board of Directors
in September 2012. As of the end of the first quarter, a total of
86.4 million shares had been repurchased under this program for
approximately $6.5 billion, at an average cost of $75.70 per
share.
Futures Orders
As of the end of the quarter, worldwide futures orders for NIKE
Brand athletic footwear and apparel scheduled for delivery from
September 2015 through January 2016 were 9 percent higher than
orders reported for the same period last year, and 17 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 24, 2015, 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 1, 2015.
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, distributes and licenses casual
sneakers, apparel and accessories; and Hurley, which designs and
distributes a line of action sports and youth lifestyle 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.
* 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 and
“at once” 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)
8/31/2015
8/31/2014 Change Revenues $ 8,414 $
7,982 5% Cost of sales 4,419
4,261 4% Gross profit
3,995 3,721 7% Gross margin 47.5 % 46.6 % Demand creation
expense 832 897 -7% Operating overhead expense
1,745 1,583
10% Total selling and administrative expense 2,577 2,480 4% % of
revenue 30.6 % 31.1 % Interest expense (income), net 4 9 -
Other (income) expense, net (31 )
3 - Income before income
taxes 1,445 1,229 18% Income tax expense
266 267 0%
Effective tax rate 18.4 % 21.7 %
NET INCOME
$ 1,179 $
962 23% Earnings per
common share: Basic $ 1.38 $ 1.11 24% Diluted $ 1.34 $ 1.09 23%
Weighted average common shares outstanding: Basic 854.5
864.9 Diluted 877.3 886.2 Dividends declared per common
share $ 0.28 $ 0.24
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
August 31, August 31, (Dollars
in millions)
2015
2014 % Change ASSETS Current assets:
Cash and equivalents $ 3,246 $ 2,303 41% Short-term investments
2,162 2,276 -5% Accounts receivable, net 3,288 3,587 -8%
Inventories 4,414 4,030 10% Deferred income taxes 377 348 8%
Prepaid expenses and other current assets
1,751 996 76% Total
current assets 15,238 13,540 13% Property, plant and equipment, net
3,112 2,895 7% Identifiable intangible assets, net 281 282 0%
Goodwill 131 131 0% Deferred income taxes and other assets
2,004 1,673
20%
TOTAL ASSETS $ 20,766
$ 18,521 12%
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 106 $ 6 1,667% Notes payable 23 146
-84% Accounts payable 1,933 1,970 -2% Accrued liabilities 3,139
2,441 29% Income taxes payable 75
250 -70% Total current
liabilities 5,276 4,813 10% Long-term debt 1,079 1,195 -10%
Deferred income taxes and other liabilities 1,517 1,408 8%
Redeemable preferred stock - - - Shareholders' equity
12,894 11,105 16%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 20,766 $ 18,521
12% NIKE, Inc.
DIVISIONAL REVENUES
% Change
Excluding
THREE MONTHS ENDED %
Currency
(Dollars in millions)
8/31/2015
8/31/20141
Change
Changes2
North America Footwear $ 2,366 $ 2,183 8 % 9 % Apparel 1,247
1,104 13 % 13 % Equipment 186
226 -18 %
-17 % Total 3,799 3,513 8 % 9 %
Western Europe Footwear
1,128 1,127 0 % 19 % Apparel 434 497 -13 % 3 % Equipment
79 89
-11 % 4 % Total 1,641 1,713 -4 % 14 %
Central & Eastern Europe Footwear 238 223 7 % 32 %
Apparel 133 135 -1 % 22 % Equipment 30
35 -14 %
7 % Total 401 393 2 % 26 %
Greater China Footwear 599
440 36 % 36 % Apparel 246 202 22 % 22 % Equipment
41 37
11 % 11 % Total 886 679 30 % 30 %
Japan
Footwear 122 100 22 % 47 % Apparel 43 46 -7 % 12 % Equipment
14 14
0 % 27 % Total 179 160 12 % 35 %
Emerging Markets Footwear 670 628 7 % 23 % Apparel 238 252
-6 % 9 % Equipment 58
54 7 % 24 % Total
966 934 3 % 19 %
Global Brand Divisions3
26 29
-10 % 5 %
Total NIKE Brand
7,898 7,421
6 % 15 % Converse 555 575 -3 % 3
% Corporate4 (39 )
(14 ) - -
Total NIKE,
Inc. Revenues $ 8,414
$ 7,982 5 % 14 %
Total
NIKE Brand Footwear $ 5,123 $ 4,701 9 % 18 % Apparel 2,341
2,236 5 % 12 % Equipment 408 455 -10 % -3 % Global Brand Divisions3
26 29
-10 % 5 %
1 Certain prior year amounts have been
reclassified to conform to fiscal 2016 presentation. These changes
had no impact on previously reported results of operations or
shareholders' equity.
2 Fiscal 2016 results have been restated
using fiscal 2015 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.
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
THREE MONTHS ENDED % (Dollars in millions)
8/31/2015
8/31/20142
Change North America $ 1,042 $ 970 7 % Western
Europe 485 404 20 % Central & Eastern Europe 98 69 42 % Greater
China 330 218 51 % Japan 36 11 227 % Emerging Markets 258 156 65 %
Global Brand Divisions3 (624 )
(534 ) -17 %
TOTAL NIKE BRAND
1,625
1,294 26 %
Converse 147 186 -21 % Corporate4 (323
) (242 ) -33 %
TOTAL EARNINGS
BEFORE INTEREST AND TAXES $
1,449 $ 1,238
17 % 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 taxes.
2 Certain prior year amounts have been
reclassified to conform to fiscal 2016 presentation. These changes
had no impact on previously reported 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.
NIKE, Inc. NIKE BRAND REPORTED FUTURES GROWTH BY
GEOGRAPHY1 As of August 31, 2015
Reported Futures Excluding Currency
Orders
Changes2
North America 14% 15% Western Europe 6% 22% Central & Eastern
Europe -3% 16% Greater China 22% 27% Japan 12% 26% Emerging Markets
-11% 6%
Total NIKE Brand
Reported Futures 9% 17% 1
Futures orders for NIKE Brand footwear and apparel scheduled for
delivery from September 2015 through January 2016. 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, sales of NIKE Brand equipment, sales from our DTC
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/20150924006383/en/
NIKE, Inc.Investor Contact:Kelley
Hall, 503-532-3793orMedia
Contact:Kellie Leonard, 503-671-6171
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