NIKE, Inc. (NYSE:NKE) today reported fiscal 2024 financial
results for its second quarter ended November 30, 2023.
- Second quarter revenues were $13.4 billion, up 1 percent on a
reported basis compared to the prior year and down 1 percent on a
currency-neutral basis*
- NIKE Direct revenues were $5.7 billion, up 6 percent on a
reported basis and up 4 percent on a currency-neutral basis
- NIKE Brand Digital sales increased 4 percent on a reported
basis and 1 percent on a currency-neutral basis
- Wholesale revenues were $7.1 billion, down 2 percent on a
reported basis and down 3 percent on a currency-neutral basis
- Gross margin increased 170 basis points to 44.6 percent
- Diluted earnings per share was $1.03 for the second quarter, up
21 percent
- NIKE, Inc. is announcing an enterprise initiative to accelerate
future growth while building a faster, more efficient Nike**
“Our Q2 results demonstrated how we are getting back on our
front foot in our key areas of innovation and growth,” said John
Donahoe, President & CEO, NIKE, Inc. “This quarter showed
strong execution by our team as we focus on our winning formula of
innovative product, distinctive storytelling and differentiated
marketplace experiences.”**
Matthew Friend, Executive Vice President & Chief Financial
Officer, NIKE, Inc. said, “NIKE’s second-quarter financial
performance was a turning point in driving more profitable growth.
As we look ahead to a softer second-half revenue outlook, we remain
focused on strong gross margin execution and disciplined cost
management.”**
The Company is identifying opportunities to deliver up to $2
billion in cumulative cost savings over the next three years. Areas
of potential savings include simplifying our product assortment,
increasing automation and use of technology, streamlining our
organization, and leveraging our scale to drive greater
efficiency.**
A majority of these savings will be invested to fuel future
growth, accelerate innovation at speed and scale, and drive greater
long-term profitability.**
As part of this commitment, the Company is taking steps to
streamline the organization, which is expected to result in pre-tax
restructuring charges of approximately $400 million to $450 million
that will largely be recognized in the third quarter of fiscal year
2024, primarily associated with employee severance costs. Revised
guidance will be provided on the conference call.**
“We see an outstanding opportunity to drive long-term profitable
growth,” said Donahoe. “Today we are embracing a company-wide
journey to invest in our areas of greatest potential, increase the
pace of our innovation, and accelerate our agility and
responsiveness.”**
Second Quarter Income Statement Review
- Revenues for NIKE, Inc. increased 1 percent to $13.4
billion compared to the prior year and decreased 1 percent on a
currency-neutral basis.
- Revenues for the NIKE Brand were $12.9 billion, up 1 percent
compared to the prior year and flat on a currency-neutral basis, as
currency-neutral growth in APLA and Greater China was offset by
declines in North America and EMEA.
- Revenues for Converse were $519 million, down 11 percent
compared to the prior year and down 13 percent on a
currency-neutral basis, due to declines in North America and
Europe, partially offset by growth in Asia.
- Gross margin increased 170 basis points to 44.6 percent,
primarily driven by strategic pricing actions and lower ocean
freight rates, partially offset by unfavorable changes in net
foreign currency exchange rates and higher product input
costs.
- Selling and administrative expense increased 1 percent
to $4.1 billion.
- Demand creation expense was $1.1 billion, up 1 percent,
reflecting an increase in marketing expense.
- Operating overhead expense was $3.0 billion, flat compared to
the prior year as increases in NIKE Direct variable costs were
offset by lower technology spend and wage-related expenses.
- The effective tax rate was 17.9 percent compared to 19.3
percent for the same period last year.
- Net income was $1.6 billion, up 19 percent, and
Diluted earnings per share was $1.03, increasing 21
percent.
November 30, 2023 Balance Sheet Review
- Inventories for NIKE, Inc. were $8.0 billion, down 14
percent compared to the prior year, reflecting a decrease in
units.
- Cash and equivalents and short-term investments were
$9.9 billion, down approximately $0.7 billion from last year, as
cash generated by operations was more than offset by share
repurchases, cash dividends, capital expenditures and bond
repayment.
Shareholder Returns
NIKE continues to have a strong track record of investing to
fuel growth and consistently increasing returns to shareholders,
including 22 consecutive years of increasing dividend payouts. In
the second quarter, NIKE returned approximately $1.7 billion to
shareholders, including:
- Dividends of $523 million, up 9 percent from the prior
year.
- Share repurchases of $1.2 billion, reflecting 11.9
million shares retired as part of the Company’s four-year, $18
billion program approved by the Board of Directors in June 2022. As
of November 30, 2023, a total of 65.9 million shares have been
repurchased under the program for a total of approximately $7.1
billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on December 21, 2023, to review fiscal
second quarter results. The conference call will be broadcast live
via the Internet and can be accessed at https://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 11, 2024.
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 https://investors.nike.com.
Individuals can also visit https://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 include, among others, the risk that NIKE is not
able to identify opportunities to deliver anticipated cost savings,
risks related to the preliminary nature of the estimate of the
charges to be incurred in connection with the enterprise
initiative, which is subject to change as NIKE refines the estimate
over time, risks related to any delays in the timing for
implementing the initiative or potential disruptions to NIKE’s
business or operations as it executes on the initiative, and other
factors that may cause NIKE to be unable to achieve the expected
benefits of the initiative, as well as the risks and uncertainties
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)
THREE MONTHS ENDED
%
SIX MONTHS ENDED
%
(In millions, except per share data)
11/30/2023
11/30/2022
Change
11/30/2023
11/30/2022
Change
Revenues
$
13,388
$
13,315
1
%
$
26,327
$
26,002
1
%
Cost of sales
7,417
7,604
-2
%
14,636
14,676
0
%
Gross profit
5,971
5,711
5
%
11,691
11,326
3
%
Gross margin
44.6
%
42.9
%
44.4
%
43.6
%
Demand creation expense
1,114
1,102
1
%
2,183
2,045
7
%
Operating overhead expense
3,032
3,022
0
%
6,079
5,999
1
%
Total selling and administrative
expense
4,146
4,124
1
%
8,262
8,044
3
%
% of revenues
31.0
%
31.0
%
31.4
%
30.9
%
Interest expense (income), net
(22
)
16
—
(56
)
29
—
Other (income) expense, net
(75
)
(79
)
—
(85
)
(225
)
—
Income before income taxes
1,922
1,650
16
%
3,570
3,478
3
%
Income tax expense
344
319
8
%
542
679
-20
%
Effective tax rate
17.9
%
19.3
%
15.2
%
19.5
%
NET INCOME
$
1,578
$
1,331
19
%
$
3,028
$
2,799
8
%
Earnings per common share:
Basic
$
1.04
$
0.85
22
%
$
1.99
$
1.79
11
%
Diluted
$
1.03
$
0.85
21
%
$
1.97
$
1.77
11
%
Weighted average common shares
outstanding:
Basic
1,520.8
1,559.0
1,524.6
1,563.1
Diluted
1,532.1
1,572.4
1,537.7
1,579.1
Dividends declared per common share
$
0.370
$
0.340
$
0.710
$
0.645
NIKE, Inc.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
November 30,
November 30,
(Dollars in millions)
2023
2022
% Change
ASSETS
Current assets:
Cash and equivalents
$
7,919
$
6,490
22
%
Short-term investments
2,008
4,131
-51
%
Accounts receivable, net
4,782
5,437
-12
%
Inventories
7,979
9,326
-14
%
Prepaid expenses and other current
assets
1,943
2,063
-6
%
Total current assets
24,631
27,447
-10
%
Property, plant and equipment, net
5,153
4,854
6
%
Operating lease right-of-use assets,
net
2,943
2,809
5
%
Identifiable intangible assets, net
269
280
-4
%
Goodwill
281
281
0
%
Deferred income taxes and other assets
3,926
3,976
-1
%
TOTAL ASSETS
$
37,203
$
39,647
-6
%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
—
$
500
-100
%
Notes payable
6
7
-14
%
Accounts payable
2,709
2,810
-4
%
Current portion of operating lease
liabilities
456
426
7
%
Accrued liabilities
5,470
6,020
-9
%
Income taxes payable
358
436
-18
%
Total current liabilities
8,999
10,199
-12
%
Long-term debt
8,930
8,924
0
%
Operating lease liabilities
2,785
2,668
4
%
Deferred income taxes and other
liabilities
2,343
2,584
-9
%
Redeemable preferred stock
—
—
—
Shareholders’ equity
14,146
15,272
-7
%
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
37,203
$
39,647
-6
%
NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
% Change
Excluding
% Change
Excluding
THREE MONTHS ENDED
%
Currency
SIX MONTHS ENDED
%
Currency
(Dollars in millions)
11/30/2023
11/30/2022
Change
Changes1
11/30/2023
11/30/2022
Change
Changes1
North America
Footwear
$
3,757
$
3,963
-5
%
-5
%
$
7,490
$
7,768
-4
%
-3
%
Apparel
1,668
1,685
-1
%
-1
%
3,147
3,179
-1
%
-1
%
Equipment
200
182
10
%
10
%
411
393
5
%
5
%
Total
5,625
5,830
-4
%
-3
%
11,048
11,340
-3
%
-2
%
Europe, Middle East &
Africa
Footwear
2,186
2,063
6
%
1
%
4,446
4,075
9
%
6
%
Apparel
1,200
1,281
-6
%
-10
%
2,337
2,434
-4
%
-7
%
Equipment
181
145
25
%
18
%
394
313
26
%
21
%
Total
3,567
3,489
2
%
-3
%
7,177
6,822
5
%
2
%
Greater China
Footwear
1,361
1,370
-1
%
3
%
2,648
2,603
2
%
7
%
Apparel
469
393
19
%
24
%
870
767
13
%
19
%
Equipment
33
25
32
%
36
%
80
74
8
%
12
%
Total
1,863
1,788
4
%
8
%
3,598
3,444
4
%
10
%
Asia Pacific & Latin
America
Footwear
1,303
1,108
18
%
15
%
2,444
2,172
13
%
11
%
Apparel
437
435
0
%
-2
%
808
848
-5
%
-5
%
Equipment
65
56
16
%
15
%
125
114
10
%
9
%
Total
1,805
1,599
13
%
10
%
3,377
3,134
8
%
7
%
Global Brand Divisions2
12
18
-33
%
-41
%
25
32
-22
%
-25
%
TOTAL NIKE BRAND
12,872
12,724
1
%
0
%
25,225
24,772
2
%
2
%
Converse
519
586
-11
%
-13
%
1,107
1,229
-10
%
-11
%
Corporate3
(3
)
5
—
—
(5
)
1
—
—
TOTAL NIKE, INC. REVENUES
$
13,388
$
13,315
1
%
-1
%
$
26,327
$
26,002
1
%
1
%
TOTAL NIKE BRAND
Footwear
$
8,607
$
8,504
1
%
0
%
$
17,028
$
16,618
2
%
2
%
Apparel
3,774
3,794
-1
%
-2
%
7,162
7,228
-1
%
-1
%
Equipment
479
408
17
%
15
%
1,010
894
13
%
12
%
Global Brand Divisions2
12
18
-33
%
-41
%
25
32
-22
%
-25
%
TOTAL NIKE BRAND REVENUES
$
12,872
$
12,724
1
%
0
%
$
25,225
$
24,772
2
%
2
%
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)
THREE MONTHS ENDED
%
SIX MONTHS ENDED
%
(Dollars in millions)
11/30/2023
11/30/2022
Change
11/30/2023
11/30/2022
Change
North America
$
1,526
$
1,497
2
%
$
2,960
$
2,874
3
%
Europe, Middle East & Africa
927
990
-6
%
1,857
1,965
-5
%
Greater China
514
511
1
%
1,039
1,052
-1
%
Asia Pacific & Latin America
521
485
7
%
935
985
-5
%
Global Brand Divisions2
(1,168
)
(1,226
)
5
%
(2,373
)
(2,413
)
2
%
TOTAL NIKE BRAND1
2,320
2,257
3
%
4,418
4,463
-1
%
Converse
115
153
-25
%
282
362
-22
%
Corporate3
(535
)
(744
)
28
%
(1,186
)
(1,318
)
10
%
TOTAL NIKE, INC. EARNINGS BEFORE
INTEREST AND TAXES1
1,900
1,666
14
%
3,514
3,507
0
%
EBIT margin1
14.2
%
12.5
%
13.3
%
13.5
%
Interest expense (income), net
(22
)
16
—
(56
)
29
—
TOTAL NIKE, INC. INCOME BEFORE INCOME
TAXES
$
1,922
$
1,650
16
%
$
3,570
$
3,478
3
%
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, 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 financial
information that should be considered when assessing the Company’s
underlying business performance and trends. EBIT margin is
calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc.
Revenues. 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/20231221310303/en/
Investor Contact: Paul Trussell
investor.relations@nike.com
Media Contact: Virginia
Rustique-Petteni media.relations@nike.com
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