BEAVERTON, Ore.--(BUSINESS WIRE)--
NIKE, Inc. (NYSE:NKE) today reported fiscal 2018 financial results for
its first quarter ended August 31, 2017. For the quarter, sustained
revenue growth in international geographies and NIKE Direct globally was
offset by an expected decline in North America wholesale revenue.
Diluted earnings per share for the quarter were $0.57, down 22 percent
driven by a gross margin decline, a higher effective tax rate and higher
other expense, net, partially offset by lower selling and administrative
expense and a lower average share count.
“This quarter, we captured near-term opportunities through our new
Consumer Direct Offense,” said Mark Parker, Chairman, President and CEO,
NIKE, Inc. “Looking ahead to the rest of fiscal 2018, we will ignite
NIKE’s next horizon of global growth through the strength of our brand,
the power of our innovative products and the most personal,
digitally-connected experiences in our industry.”*
As previously announced on June 15, 2017, a new company alignment was
created as a result of the Consumer Direct Offense which simplified NIKE
Brand’s geography structure from six geographies to four consisting of
North America; Europe, Middle East & Africa (EMEA); Greater China; and
Asia Pacific & Latin America (APLA). The financial results for the NIKE
Brand are now reported based on these four operating segments.
First Quarter Income Statement Review
-
Revenues for NIKE, Inc. were $9.1 billion, flat
to prior year on both a reported and currency-neutral basis.**
-
Revenues for the NIKE Brand were $8.6 billion, up 2 percent on a
currency-neutral basis driven by growth in Greater China, EMEA and
APLA, including growth in Sportswear.
-
Revenues for Converse were $483 million, down 16 percent on a
currency-neutral basis, mainly driven by declines in North America.
-
Gross margin declined 180 basis points to 43.7 percent
due primarily to unfavorable changes in foreign currency exchange
rates and, to a lesser extent, a higher mix of off-price sales.
-
Selling and administrative expense decreased 1 percent
to $2.9 billion. Demand creation expense was $855 million, down 18
percent, reflecting higher prior year investments in key sports
events. Operating overhead expense increased 8 percent to $2.0 billion
driven by realignment costs associated with a previously announced
workforce reduction in June and continued investments in NIKE Direct.
-
Other expense, net was $18 million, primarily comprised
of net foreign currency exchange losses.
-
The effective tax rate was 11.4 percent, compared to 2.5
percent for the same period last year, reflecting the tax benefit from
stock-based compensation in the current period as a result of the
adoption of Accounting Standards Update 2016-09. The prior year period
included a one-time benefit related to the resolution with the IRS of
a foreign tax credit matter.
-
Net income decreased 24 percent to $950 million as lower
selling and administrative expense was offset by a gross margin
decline, a higher effective tax rate and growth in other expense, net,
while diluted earnings per share decreased 22 percent
from the prior year to $0.57 reflecting a nearly 2 percent decline in
the weighted average diluted common shares outstanding.
August 31, 2017 Balance Sheet Review
-
Inventories for NIKE, Inc. were $5.2 billion, up 6
percent from August 31, 2016, driven by a higher average cost per unit
primarily due to product mix and, to a lesser extent, changes in
foreign currency exchange rates and growth in NIKE Direct businesses.
-
Cash and equivalents and short-term investments were
$5.5 billion, $732 million higher than last year as net income and
proceeds from the issuance of debt in the second quarter of fiscal
2017 were partially offset by share repurchases, dividends and
investments in infrastructure.
Share Repurchases
During the first quarter, NIKE, Inc. repurchased a total of 15.3 million
shares for approximately $849 million as part of the four-year, $12
billion program approved by the Board of Directors in November 2015. As
of August 31, 2017, a total of 95.0 million shares had been repurchased
under this program for approximately $5.3 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on September 26, 2017, 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 3,
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.
Individuals can also visit http://news.nike.com
and follow @NIKE.
* The marked paragraph contains 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.
** See additional information in the accompanying Divisional
Revenues table regarding this non-GAAP financial measure.
|
NIKE, Inc.
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
%
|
|
(Dollars in millions, except per share data)
|
|
|
8/31/2017
|
|
|
|
8/31/2016
|
|
|
Change
|
Revenues
|
|
$
|
9,070
|
|
|
$
|
9,061
|
|
|
0
|
%
|
Cost of sales
|
|
|
5,108
|
|
|
|
4,938
|
|
|
3
|
%
|
Gross profit
|
|
|
3,962
|
|
|
|
4,123
|
|
|
-4
|
%
|
Gross margin
|
|
|
43.7
|
%
|
|
|
45.5
|
%
|
|
|
|
|
|
|
|
|
|
Demand creation expense
|
|
|
855
|
|
|
|
1,041
|
|
|
-18
|
%
|
Operating overhead expense
|
|
|
2,001
|
|
|
|
1,856
|
|
|
8
|
%
|
Total selling and administrative expense
|
|
|
2,856
|
|
|
|
2,897
|
|
|
-1
|
%
|
% of revenues
|
|
|
31.5
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net
|
|
|
16
|
|
|
|
7
|
|
|
—
|
|
Other expense (income), net
|
|
|
18
|
|
|
|
(62
|
)
|
|
—
|
|
Income before income taxes
|
|
|
1,072
|
|
|
|
1,281
|
|
|
-16
|
%
|
Income tax expense
|
|
|
122
|
|
|
|
32
|
|
|
281
|
%
|
Effective tax rate
|
|
|
11.4
|
%
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
950
|
|
|
$
|
1,249
|
|
|
-24
|
%
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
|
$
|
0.75
|
|
|
-23
|
%
|
Diluted
|
|
$
|
0.57
|
|
|
$
|
0.73
|
|
|
-22
|
%
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
1,639.1
|
|
|
|
1,672.0
|
|
|
|
Diluted
|
|
|
1,676.9
|
|
|
|
1,708.9
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIKE, Inc.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
August 31,
|
|
% Change
|
|
(Dollars in millions)
|
|
|
2017
|
|
|
2016
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,413
|
|
$
|
2,659
|
|
28
|
%
|
Short-term investments
|
|
|
2,106
|
|
|
2,128
|
|
-1
|
%
|
Accounts receivable, net
|
|
|
3,871
|
|
|
3,526
|
|
10
|
%
|
Inventories
|
|
|
5,211
|
|
|
4,896
|
|
6
|
%
|
Prepaid expenses and other current assets
|
|
|
1,591
|
|
|
1,380
|
|
15
|
%
|
Total current assets
|
|
|
16,192
|
|
|
14,589
|
|
11
|
%
|
Property, plant and equipment, net
|
|
|
4,086
|
|
|
3,572
|
|
14
|
%
|
Identifiable intangible assets, net
|
|
|
283
|
|
|
284
|
|
0
|
%
|
Goodwill
|
|
|
139
|
|
|
139
|
|
0
|
%
|
Deferred income taxes and other assets
|
|
|
2,947
|
|
|
2,572
|
|
15
|
%
|
TOTAL ASSETS
|
|
$
|
23,647
|
|
$
|
21,156
|
|
12
|
%
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
7
|
|
$
|
44
|
|
-84
|
%
|
Notes payable
|
|
|
335
|
|
|
22
|
|
—
|
|
Accounts payable
|
|
|
2,116
|
|
|
2,088
|
|
1
|
%
|
Accrued liabilities
|
|
|
3,501
|
|
|
3,147
|
|
11
|
%
|
Income taxes payable
|
|
|
97
|
|
|
62
|
|
56
|
%
|
Total current liabilities
|
|
|
6,056
|
|
|
5,363
|
|
13
|
%
|
Long-term debt
|
|
|
3,472
|
|
|
1,993
|
|
74
|
%
|
Deferred income taxes and other liabilities
|
|
|
2,126
|
|
|
1,635
|
|
30
|
%
|
Redeemable preferred stock
|
|
|
—
|
|
|
—
|
|
—
|
|
Shareholders' equity
|
|
|
11,993
|
|
|
12,165
|
|
-1
|
%
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
$
|
23,647
|
|
$
|
21,156
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
NIKE, Inc.
|
DIVISIONAL REVENUES1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
Excluding
|
|
THREE MONTHS ENDED
|
|
|
|
|
Currency
|
(Dollars in millions)
|
|
8/31/2017
|
|
|
8/31/2016
|
|
% Change
|
|
Changes2
|
North America
|
|
|
|
|
|
|
|
Footwear
|
$
|
2,434
|
|
$
|
2,518
|
|
-3
|
%
|
|
-3
|
%
|
Apparel
|
|
1,299
|
|
|
1,317
|
|
-1
|
%
|
|
-1
|
%
|
Equipment
|
|
191
|
|
|
196
|
|
-3
|
%
|
|
-3
|
%
|
Total
|
|
3,924
|
|
|
4,031
|
|
-3
|
%
|
|
-3
|
%
|
Europe, Middle East & Africa
|
|
|
|
|
|
|
|
Footwear
|
|
1,471
|
|
|
1,457
|
|
1
|
%
|
|
2
|
%
|
Apparel
|
|
743
|
|
|
684
|
|
9
|
%
|
|
10
|
%
|
Equipment
|
|
130
|
|
|
121
|
|
7
|
%
|
|
8
|
%
|
Total
|
|
2,344
|
|
|
2,262
|
|
4
|
%
|
|
5
|
%
|
Greater China
|
|
|
|
|
|
|
|
Footwear
|
|
761
|
|
|
710
|
|
7
|
%
|
|
10
|
%
|
Apparel
|
|
309
|
|
|
269
|
|
15
|
%
|
|
18
|
%
|
Equipment
|
|
38
|
|
|
41
|
|
-7
|
%
|
|
-3
|
%
|
Total
|
|
1,108
|
|
|
1,020
|
|
9
|
%
|
|
12
|
%
|
Asia Pacific & Latin America
|
|
|
|
|
|
|
|
Footwear
|
|
827
|
|
|
787
|
|
5
|
%
|
|
6
|
%
|
Apparel
|
|
301
|
|
|
279
|
|
8
|
%
|
|
9
|
%
|
Equipment
|
|
61
|
|
|
65
|
|
-6
|
%
|
|
-5
|
%
|
Total
|
|
1,189
|
|
|
1,131
|
|
5
|
%
|
|
6
|
%
|
Global Brand Divisions3
|
|
20
|
|
|
15
|
|
33
|
%
|
|
16
|
%
|
TOTAL NIKE BRAND
|
|
8,585
|
|
|
8,459
|
|
1
|
%
|
|
2
|
%
|
Converse
|
|
483
|
|
|
574
|
|
-16
|
%
|
|
-16
|
%
|
Corporate4
|
|
2
|
|
|
28
|
|
—
|
|
|
—
|
|
TOTAL NIKE, INC. REVENUES
|
$
|
9,070
|
|
$
|
9,061
|
|
0
|
%
|
|
0
|
%
|
|
|
|
|
|
|
|
|
TOTAL NIKE BRAND
|
|
|
|
|
|
|
|
Footwear
|
$
|
5,493
|
|
$
|
5,472
|
|
0
|
%
|
|
1
|
%
|
Apparel
|
|
2,652
|
|
|
2,549
|
|
4
|
%
|
|
5
|
%
|
Equipment
|
|
420
|
|
|
423
|
|
-1
|
%
|
|
0
|
%
|
Global Brand Divisions3
|
|
20
|
|
|
15
|
|
33
|
%
|
|
16
|
%
|
TOTAL NIKE BRAND REVENUES
|
$
|
8,585
|
|
$
|
8,459
|
|
1
|
%
|
|
2
|
%
|
|
1 Certain prior year amounts have been reclassified to
conform to fiscal 2018 presentation. This includes reclassified
operating segment data to reflect the changes in the Company's
operating structure, which became effective June 1, 2017. These
changes had no impact on previously reported consolidated results of
operations or shareholders' equity.
|
|
2 The percentage change has been calculated using actual exchange
rates in use during the comparative prior year period 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.
|
|
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 TAXES1,2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
|
(Dollars in millions)
|
|
8/31/2017
|
|
|
|
8/31/2016
|
|
|
% Change
|
North America
|
$
|
1,002
|
|
|
$
|
1,004
|
|
|
0
|
%
|
Europe, Middle East & Africa
|
|
451
|
|
|
|
485
|
|
|
-7
|
%
|
Greater China
|
|
394
|
|
|
|
371
|
|
|
6
|
%
|
Asia Pacific & Latin America
|
|
260
|
|
|
|
209
|
|
|
24
|
%
|
Global Brand Divisions3
|
|
(675
|
)
|
|
|
(771
|
)
|
|
12
|
%
|
TOTAL NIKE BRAND
|
|
1,432
|
|
|
|
1,298
|
|
|
10
|
%
|
Converse
|
|
89
|
|
|
|
153
|
|
|
-42
|
%
|
Corporate4
|
|
(433
|
)
|
|
|
(163
|
)
|
|
-166
|
%
|
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES
|
|
1,088
|
|
|
|
1,288
|
|
|
-16
|
%
|
Interest expense (income), net
|
|
16
|
|
|
|
7
|
|
|
—
|
|
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
|
$
|
1,072
|
|
|
$
|
1,281
|
|
|
-16
|
%
|
|
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.
|
|
2 Certain prior year amounts have been reclassified to
conform to fiscal 2018 presentation. This includes reclassified
operating segment data to reflect the changes in the Company's
operating structure, which became effective June 1, 2017. These
changes had no impact on previously reported consolidated 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.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170926006688/en/
Source: NIKE, Inc.