BEAVERTON, Ore.--(BUSINESS WIRE)--
NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal
2018 third quarter ended February 28, 2018. Revenue growth was led by
international geographies and NIKE Direct globally.
Diluted net loss per share was $0.57, reflecting significantly higher
income tax expense from the enactment of the Tax Cuts and Jobs Act (the
“Tax Act”). The impact of the Tax Act resulted in one-time provisional
charges that reduced diluted earnings per share by $1.25.
“NIKE’s Consumer Direct Offense drove strong double-digit growth across
our international geographies, led by Greater China,” said Mark Parker,
Chairman, President and CEO, NIKE, Inc. “As we close Q3, we now see a
significant reversal of trend in North America, as momentum accelerates
through the scaling of new innovation platforms and differentiated NIKE
Consumer Experiences expand across the marketplace.”*
Third Quarter Income Statement Review
-
Revenues for NIKE, Inc. increased 7 percent to
$9.0 billion, up 3 percent on a currency-neutral basis.**
-
Revenues for the NIKE Brand were $8.5 billion, up 4 percent on a
currency-neutral basis, driven by Greater China, EMEA and APLA,
including double-digit growth in NIKE Direct and growth in
Sportswear and NIKE Basketball.
-
Revenues for Converse were $483 million, down 8 percent on a
currency-neutral basis, as international and digital growth were
more than offset by declines in North America.
-
Gross margin declined 70 basis points to 43.8 percent
due primarily to unfavorable changes in foreign currency exchange
rates, which were partially offset by lower product costs.
-
Selling and administrative expense increased 11 percent
to $2.8 billion. Demand creation expense was $862 million, up 15
percent, primarily driven by higher spend in sports marketing, brand
moments and new innovation launches. Operating overhead expense
increased 9 percent to $1.9 billion, largely due to higher
administrative costs and continued investments in global digital
capabilities and the NikePlus membership program.
-
Income before income taxes decreased 12 percent to $1.2
billion as solid revenue growth was more than offset by lower gross
margin, higher selling and administrative expense and lower other
income.
-
The effective tax rate was 179.5 percent, driven by the
Tax Act, which impacted comparability. During the quarter, as a result
of enactment of the Tax Act on December 22, 2017, the Company recorded
additional income tax expense of $2.0 billion primarily related to the
transition tax on our accumulated foreign earnings and the
remeasurement of deferred tax assets and liabilities. This amount was
recorded as a provisional estimate and is subject to change as the
Company completes its analysis during the measurement period, which
should not extend beyond one year from the enactment date.
-
Net loss was $921 million and diluted net loss per share
was $0.57, driven by the enactment of the Tax Act.
February 28, 2018 Balance Sheet Review
-
Inventories for NIKE, Inc. were $5.4 billion, up 9
percent from February 28, 2017, driven primarily by strengthening
demand globally and, to a lesser extent, changes in foreign currency
exchange rates.
-
Cash and equivalents and short-term investments were
$4.8 billion, $1.4 billion lower than last year as share repurchases,
dividends and investments in infrastructure more than offset net
income and proceeds from employee exercises of stock options.
Share Repurchases
During the third quarter, NIKE, Inc. repurchased a total of 14.6 million
shares for approximately $962 million as part of the four-year, $12
billion program approved by the Board of Directors in November 2015. As
of February 28, 2018, a total of 126.4 million shares had been
repurchased under this program for approximately $7.2 billion.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on March 22, 2018, to review fiscal third
quarter results. The conference call will be broadcast live via webcast
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 29,
2018.
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.
(Tables Follow)
NIKE, Inc.
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
%
|
|
|
NINE MONTHS ENDED
|
|
%
|
|
(Dollars in millions, except per share data)
|
|
|
2/28/2018
|
|
|
|
2/28/2017
|
|
|
Change
|
|
|
2/28/2018
|
|
|
|
2/28/2017
|
|
|
Change
|
Revenues
|
|
$
|
8,984
|
|
|
$
|
8,432
|
|
|
7
|
%
|
|
$
|
26,608
|
|
|
$
|
25,673
|
|
|
4
|
%
|
Cost of sales
|
|
|
5,046
|
|
|
|
4,682
|
|
|
8
|
%
|
|
|
15,030
|
|
|
|
14,184
|
|
|
6
|
%
|
Gross profit
|
|
|
3,938
|
|
|
|
3,750
|
|
|
5
|
%
|
|
|
11,578
|
|
|
|
11,489
|
|
|
1
|
%
|
Gross margin
|
|
|
43.8
|
%
|
|
|
44.5
|
%
|
|
|
|
|
43.5
|
%
|
|
|
44.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand creation expense
|
|
|
862
|
|
|
|
749
|
|
|
15
|
%
|
|
|
2,594
|
|
|
|
2,552
|
|
|
2
|
%
|
Operating overhead expense
|
|
|
1,905
|
|
|
|
1,747
|
|
|
9
|
%
|
|
|
5,797
|
|
|
|
5,346
|
|
|
8
|
%
|
Total selling and administrative expense
|
|
|
2,767
|
|
|
|
2,496
|
|
|
11
|
%
|
|
|
8,391
|
|
|
|
7,898
|
|
|
6
|
%
|
% of revenues
|
|
|
30.8
|
%
|
|
|
29.6
|
%
|
|
|
|
|
31.5
|
%
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net
|
|
|
13
|
|
|
|
19
|
|
|
—
|
|
|
|
42
|
|
|
|
41
|
|
|
—
|
|
Other (income) expense, net
|
|
|
(1
|
)
|
|
|
(88
|
)
|
|
—
|
|
|
|
35
|
|
|
|
(168
|
)
|
|
—
|
|
Income before income taxes
|
|
|
1,159
|
|
|
|
1,323
|
|
|
-12
|
%
|
|
|
3,110
|
|
|
|
3,718
|
|
|
-16
|
%
|
Income tax expense
|
|
|
2,080
|
|
|
|
182
|
|
|
1,043
|
%
|
|
|
2,314
|
|
|
|
486
|
|
|
376
|
%
|
Effective tax rate
|
|
|
179.5
|
%
|
|
|
13.8
|
%
|
|
|
|
|
74.4
|
%
|
|
|
13.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
$
|
(921
|
)
|
|
$
|
1,141
|
|
|
-181
|
%
|
|
$
|
796
|
|
|
$
|
3,232
|
|
|
-75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.57
|
)
|
|
$
|
0.69
|
|
|
-183
|
%
|
|
$
|
0.49
|
|
|
$
|
1.95
|
|
|
-75
|
%
|
Diluted
|
|
$
|
(0.57
|
)
|
|
$
|
0.68
|
|
|
-184
|
%
|
|
$
|
0.48
|
|
|
$
|
1.91
|
|
|
-75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,623.5
|
|
|
|
1,653.1
|
|
|
|
|
|
1,629.9
|
|
|
|
1,661.5
|
|
|
|
Diluted
|
|
|
1,623.5
|
|
|
|
1,686.3
|
|
|
|
|
|
1,665.7
|
|
|
|
1,696.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.20
|
|
|
$
|
0.18
|
|
|
|
|
$
|
0.58
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NIKE, Inc.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
February 28,
|
|
February 28,
|
|
|
(Dollars in millions)
|
|
2018
|
|
2017
|
|
% Change
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
3,662
|
|
$
|
4,021
|
|
-9
|
%
|
Short-term investments
|
|
|
1,089
|
|
|
2,139
|
|
-49
|
%
|
Accounts receivable, net
|
|
|
3,792
|
|
|
3,752
|
|
1
|
%
|
Inventories
|
|
|
5,366
|
|
|
4,932
|
|
9
|
%
|
Prepaid expenses and other current assets
|
|
|
1,446
|
|
|
1,361
|
|
6
|
%
|
Total current assets
|
|
|
15,355
|
|
|
16,205
|
|
-5
|
%
|
Property, plant and equipment, net
|
|
|
4,298
|
|
|
3,793
|
|
13
|
%
|
Identifiable intangible assets, net
|
|
|
282
|
|
|
283
|
|
0
|
%
|
Goodwill
|
|
|
139
|
|
|
139
|
|
0
|
%
|
Deferred income taxes and other assets
|
|
|
2,478
|
|
|
2,732
|
|
-9
|
%
|
TOTAL ASSETS
|
|
$
|
22,552
|
|
$
|
23,152
|
|
-3
|
%
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
6
|
|
$
|
6
|
|
0
|
%
|
Notes payable
|
|
|
11
|
|
|
23
|
|
-52
|
%
|
Accounts payable
|
|
|
1,961
|
|
|
1,938
|
|
1
|
%
|
Accrued liabilities
|
|
|
3,727
|
|
|
3,228
|
|
15
|
%
|
Income taxes payable
|
|
|
78
|
|
|
76
|
|
3
|
%
|
Total current liabilities
|
|
|
5,783
|
|
|
5,271
|
|
10
|
%
|
Long-term debt
|
|
|
3,469
|
|
|
3,472
|
|
0
|
%
|
Deferred income taxes and other liabilities
|
|
|
3,518
|
|
|
1,687
|
|
109
|
%
|
Redeemable preferred stock
|
|
|
—
|
|
|
—
|
|
—
|
|
Shareholders' equity
|
|
|
9,782
|
|
|
12,722
|
|
-23
|
%
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
$
|
22,552
|
|
$
|
23,152
|
|
-3
|
%
|
|
|
|
|
|
|
|
|
|
|
NIKE, Inc.
|
DIVISIONAL REVENUES1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
Excluding
|
|
|
|
|
|
|
|
Excluding
|
|
|
THREE MONTHS ENDED
|
|
%
|
|
Currency
|
|
NINE MONTHS ENDED
|
|
%
|
|
Currency
|
(Dollars in millions)
|
|
2/28/2018
|
|
2/28/2017
|
|
Change
|
|
Changes2
|
|
2/28/2018
|
|
2/28/2017
|
|
Change
|
|
Changes2
|
North America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footwear
|
|
$ 2,293
|
|
$ 2,490
|
|
-8%
|
|
-8%
|
|
$ 6,797
|
|
$ 7,227
|
|
-6%
|
|
-6%
|
Apparel
|
|
1,153
|
|
1,154
|
|
0%
|
|
0%
|
|
3,731
|
|
3,744
|
|
0%
|
|
0%
|
Equipment
|
|
125
|
|
138
|
|
-9%
|
|
-9%
|
|
452
|
|
492
|
|
-8%
|
|
-8%
|
Total
|
|
3,571
|
|
3,782
|
|
-6%
|
|
-6%
|
|
10,980
|
|
11,463
|
|
-4%
|
|
-4%
|
Europe, Middle East & Africa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footwear
|
|
1,489
|
|
1,271
|
|
17%
|
|
7%
|
|
4,250
|
|
3,844
|
|
11%
|
|
6%
|
Apparel
|
|
713
|
|
566
|
|
26%
|
|
15%
|
|
2,199
|
|
1,838
|
|
20%
|
|
15%
|
Equipment
|
|
97
|
|
88
|
|
10%
|
|
0%
|
|
327
|
|
297
|
|
10%
|
|
6%
|
Total
|
|
2,299
|
|
1,925
|
|
19%
|
|
9%
|
|
6,776
|
|
5,979
|
|
13%
|
|
9%
|
Greater China
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footwear
|
|
939
|
|
776
|
|
21%
|
|
16%
|
|
2,493
|
|
2,155
|
|
16%
|
|
14%
|
Apparel
|
|
368
|
|
271
|
|
36%
|
|
30%
|
|
1,074
|
|
895
|
|
20%
|
|
19%
|
Equipment
|
|
29
|
|
28
|
|
4%
|
|
-4%
|
|
99
|
|
100
|
|
-1%
|
|
-2%
|
Total
|
|
1,336
|
|
1,075
|
|
24%
|
|
19%
|
|
3,666
|
|
3,150
|
|
16%
|
|
15%
|
Asia Pacific & Latin America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footwear
|
|
884
|
|
777
|
|
14%
|
|
12%
|
|
2,584
|
|
2,382
|
|
8%
|
|
9%
|
Apparel
|
|
321
|
|
278
|
|
15%
|
|
13%
|
|
964
|
|
876
|
|
10%
|
|
11%
|
Equipment
|
|
63
|
|
67
|
|
-6%
|
|
-7%
|
|
182
|
|
201
|
|
-9%
|
|
-9%
|
Total
|
|
1,268
|
|
1,122
|
|
13%
|
|
11%
|
|
3,730
|
|
3,459
|
|
8%
|
|
8%
|
Global Brand Divisions3
|
|
21
|
|
19
|
|
11%
|
|
11%
|
|
64
|
|
55
|
|
16%
|
|
15%
|
TOTAL NIKE BRAND
|
|
8,495
|
|
7,923
|
|
7%
|
|
4%
|
|
25,216
|
|
24,106
|
|
5%
|
|
3%
|
Converse
|
|
483
|
|
498
|
|
-3%
|
|
-8%
|
|
1,374
|
|
1,488
|
|
-8%
|
|
-10%
|
Corporate4
|
|
6
|
|
11
|
|
—
|
|
—
|
|
18
|
|
79
|
|
—
|
|
—
|
TOTAL NIKE, INC. REVENUES
|
|
$ 8,984
|
|
$ 8,432
|
|
7%
|
|
3%
|
|
$ 26,608
|
|
$ 25,673
|
|
4%
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NIKE BRAND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footwear
|
|
$ 5,605
|
|
$ 5,314
|
|
5%
|
|
2%
|
|
$ 16,124
|
|
$ 15,608
|
|
3%
|
|
2%
|
Apparel
|
|
2,555
|
|
2,269
|
|
13%
|
|
9%
|
|
7,968
|
|
7,353
|
|
8%
|
|
7%
|
Equipment
|
|
314
|
|
321
|
|
-2%
|
|
-6%
|
|
1,060
|
|
1,090
|
|
-3%
|
|
-4%
|
Global Brand Divisions3
|
|
21
|
|
19
|
|
11%
|
|
11%
|
|
64
|
|
55
|
|
16%
|
|
15%
|
TOTAL NIKE BRAND REVENUES
|
|
$ 8,495
|
|
$ 7,923
|
|
7%
|
|
4%
|
|
$ 25,216
|
|
$ 24,106
|
|
5%
|
|
3%
|
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
|
|
%
|
|
NINE MONTHS ENDED
|
|
%
|
(Dollars in millions)
|
|
2/28/2018
|
|
2/28/2017
|
|
Change
|
|
2/28/2018
|
|
2/28/2017
|
|
Change
|
North America
|
|
$
|
840
|
|
|
$
|
980
|
|
|
-14
|
%
|
|
$
|
2,625
|
|
|
$
|
2,896
|
|
|
-9
|
%
|
Europe, Middle East & Africa
|
|
|
417
|
|
|
|
361
|
|
|
16
|
%
|
|
|
1,205
|
|
|
|
1,159
|
|
|
4
|
%
|
Greater China
|
|
|
496
|
|
|
|
381
|
|
|
30
|
%
|
|
|
1,268
|
|
|
|
1,127
|
|
|
13
|
%
|
Asia Pacific & Latin America
|
|
|
298
|
|
|
|
228
|
|
|
31
|
%
|
|
|
849
|
|
|
|
703
|
|
|
21
|
%
|
Global Brand Divisions3
|
|
|
(649
|
)
|
|
|
(598
|
)
|
|
-9
|
%
|
|
|
(1,926
|
)
|
|
|
(1,988
|
)
|
|
3
|
%
|
TOTAL NIKE BRAND
|
|
|
1,402
|
|
|
|
1,352
|
|
|
4
|
%
|
|
|
4,021
|
|
|
|
3,897
|
|
|
3
|
%
|
Converse
|
|
|
69
|
|
|
|
109
|
|
|
-37
|
%
|
|
|
206
|
|
|
|
340
|
|
|
-39
|
%
|
Corporate4
|
|
|
(299
|
)
|
|
|
(119
|
)
|
|
-151
|
%
|
|
|
(1,075
|
)
|
|
|
(478
|
)
|
|
-125
|
%
|
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES
|
|
|
1,172
|
|
|
|
1,342
|
|
|
-13
|
%
|
|
|
3,152
|
|
|
|
3,759
|
|
|
-16
|
%
|
Interest expense (income), net
|
|
|
13
|
|
|
|
19
|
|
|
—
|
|
|
|
42
|
|
|
|
41
|
|
|
—
|
|
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
|
|
$
|
1,159
|
|
|
$
|
1,323
|
|
|
-12
|
%
|
|
$
|
3,110
|
|
|
$
|
3,718
|
|
|
-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: https://www.businesswire.com/news/home/20180322006196/en/
Source: NIKE, Inc.