NKE
$58.42
Nike
$.06
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Earnings Details
4th Quarter May 2017
Thursday, June 29, 2017 4:15:01 PM
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Summary

Nike Beats

Nike (NKE) reported 4th Quarter May 2017 earnings of $0.60 per share on revenue of $8.7 billion. The consensus earnings estimate was $0.49 per share on revenue of $8.6 billion. The Earnings Whisper number was $0.54 per share. Revenue grew 5.3% on a year-over-year basis.

Nike Inc designs, develops and markets footwear, apparel, equipment, and accessory products. It is a seller of athletic footwear and athletic apparel. It sells its products through NIKE-owned in-line and factory retail stores and internet websites.

Results
Reported Earnings
$0.60
Earnings Whisper
$0.54
Consensus Estimate
$0.49
Reported Revenue
$8.68 Bil
Revenue Estimate
$8.61 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIKE, Inc. Reports Fiscal 2017 Fourth Quarter and Full Year Results

Fourth quarter diluted earnings per share increased 22 percent to $0.60

Fiscal 2017 revenues up 6 percent to $34.4 billion; 8 percent growth on a currency-neutral basis*

--Fiscal 2017 diluted earnings per share increased 16 percent to $2.51

--Inventories up 4 percent as of May 31, 2017

NIKE, Inc. (NKE) today reported fiscal 2017 financial results for its fourth quarter and full year ended May 31, 2017. International geographies and the Direct-to-Consumer (DTC) businesses globally led strong revenue growth in the fourth quarter and full year.

Diluted earnings per share for the quarter rose 22 percent to $0.60 driven by global revenue growth, lower selling and administrative expense, a lower tax rate and a lower average share count which were slightly offset by lower gross margin.

Fiscal 2017 diluted earnings per share rose 16 percent to $2.51, reflecting revenue growth of 6 percent, a lower tax rate and a lower average share count which was slightly offset by lower gross margin.

"NIKE continues to create both near-term wins in today’s dynamic environment and a lasting foundation for future growth," said Mark Parker, Chairman, President and CEO, NIKE, Inc. "Through our Consumer Direct Offense, we’re putting even more firepower behind our greatest opportunities in Fiscal 2018. It will be a big year for NIKE innovation and we’ll bring those stories to life through deeper consumer connections in our key cities around the world."**

Fourth Quarter Income Statement Review

Revenues for NIKE, Inc. rose 5 percent to $8.7 billion, up 7 percent on a currency-neutral basis. -- Revenues for the NIKE Brand were $8.1 billion, up 7 percent on a currency-neutral basis driven by double-digit growth in Western Europe, Greater China, and the Emerging Markets, and strong growth in Sportswear and Running.

Revenues for Converse were $554 million, up 10 percent on a currency-neutral basis, primarily driven by the market transition in Italy and growth in DTC.

Gross margin declined 180 basis points to 44.1 percent as higher average selling prices were more than offset by unfavorable changes in foreign currency exchange rates and higher product costs.

Selling and administrative expense decreased 4 percent to $2.7 billion. Demand creation expense was $789 million, down 10 percent, as fiscal 2017 spend was weighted towards the beginning of the year due to significant investments around the Olympics and the European Football Championship. Operating overhead expense decreased 1 percent to $1.9 billion, as continued investments in DTC were offset by administrative cost efficiencies.

Other income, net was $28 million comprised primarily of net foreign currency exchange hedge gains.

The effective tax rate was 13.7 percent, compared to 21.2 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.

Net income increased 19 percent to $1.0 billion primarily due to global revenue growth, lower selling and administrative expense and a lower tax rate which were slightly offset by a gross margin decline, while diluted earnings per share increased 22 percent to $0.60 reflecting a nearly 3 percent decline in the weighted average diluted common shares outstanding.

Fiscal 2017 Income Statement Review

Revenues for NIKE, Inc. rose 6 percent to $34.4 billion, up 8 percent on a currency-neutral basis.

Also, on a currency-neutral basis: -- Revenues for the NIKE Brand were $32.2 billion, up 8 percent.

NIKE Brand sales to wholesale customers increased 5 percent while DTC revenues grew to $9.1 billion, up 18 percent, driven by a 30 percent increase in digital commerce sales, the addition of new stores and 7 percent growth in comparable store sales. As of May 31, 2017, the NIKE Brand had 985 DTC stores in operation as compared to 919 a year ago.

NIKE Brand revenue growth was driven by growth in every geography as well as key categories including Sportswear, Running and the Jordan Brand.

Revenues for Converse were $2.0 billion, up 6 percent, driven by growth in the United States and Europe due to the market transition in Italy.

Gross margin declined 160 basis points to 44.6 percent as higher average selling prices were more than offset by the negative impact of changes in foreign currency exchange rates and higher product costs.

Selling and administrative expense increased 1 percent to $10.6 billion. Demand creation expense was $3.3 billion, up 2 percent, primarily due to higher sports marketing costs and significant investments around the Olympics and the European Football Championship in the first half of the fiscal year. Operating overhead expense remained flat at $7.2 billion, as continued investments in DTC were offset by administrative cost efficiencies and lower variable compensation.

Other income, net was $196 million comprised primarily of net foreign currency exchange hedge gains.

The effective tax rate was 13.2 percent, compared to 18.7 percent for the same period last year primarily due to a one-time benefit in the first quarter of the fiscal year related to the resolution with the U.S. Internal Revenue Service of a foreign tax credit matter, and a decrease in foreign earnings taxed in the U.S.

Net income increased 13 percent to $4.2 billion reflecting strong global revenue growth, selling and administrative expense leverage and a lower tax rate which were slightly offset by a decline in gross margin. Diluted earnings per share increased 16 percent to $2.51, reflecting growth in net income and the additional benefit of a decline in the weighted average diluted common shares outstanding.

May 31, 2017 Balance Sheet Review

Inventories for NIKE, Inc. were $5.1 billion, up 4 percent from May 31, 2016, as a 3 percent decrease in NIKE Brand wholesale unit inventories was more than offset by increases in average product cost per unit and growth in our DTC businesses.

Cash and short-term investments were $6.2 billion, $722 million higher than last year as growth in net income, proceeds from the issuance of debt in the second quarter of fiscal 2017 and proceeds from employee exercises of stock options were partially offset by share repurchases, dividends, and investments in infrastructure and working capital.

Share Repurchases

During the fourth quarter, NIKE, Inc. repurchased a total of 14.9 million shares for approximately $820 million as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. As of May 31, 2017, a total of 79.8 million shares had been repurchased under this program for approximately $4.4 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on June 29, 2017, to review fiscal fourth quarter and full year 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, July 6, 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 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.
NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
%
TWELVE MONTHS ENDED
%
(Dollars in millions, except per share data)
5/31/2017
5/31/2016
Change
5/31/2017
5/31/2016
Change
Revenues
$
8,677
$
8,244
5 %
$
34,350
$
32,376
6 %
Cost of sales
4,854
4,458
9 %
19,038
17,405
9 %
Gross profit
3,823
3,786
1 %
15,312
14,971
2 %
Gross margin
44.1 %
45.9 %
44.6 %
46.2 %
Demand creation expense
789
873
-10 %
3,341
3,278
2 %
Operating overhead expense
1,876
1,893
-1 %
7,222
7,191
0 %
Total selling and administrative expense
2,665
2,766
-4 %
10,563
10,469
1 %
% of revenues
30.7 %
33.6 %
30.8 %
32.3 %
Interest expense (income), net
18
5
--
59
19
--
Other (income) expense, net
(28 )
(58 )
--
(196 )
(140 )
--
Income before income taxes
1,168
1,073
9 %
4,886
4,623
6 %
Income tax expense
160
227
-30 %
646
863
-25 %
Effective tax rate
13.7 %
21.2 %
13.2 %
18.7 %
NET INCOME
$
1,008
$
846
19 %
$
4,240
$
3,760
13 %
Earnings per common share:
Basic
$
0.61
$
0.50
22 %
$
2.56
$
2.21
16 %
Diluted
$
0.60
$
0.49
22 %
$
2.51
$
2.16
16 %
Weighted average common shares outstanding:
Basic
1,646.9
1,682.4
1,657.8
1,697.9
Diluted
1,678.6
1,723.1
1,692.0
1,742.5
Dividends declared per common share
$
0.18
$
0.16
$
0.70
$
0.62
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
May 31,
May 31,
(Dollars in millions)
2017
2016
% Change
ASSETS
Current assets:
Cash and equivalents
$
3,808
$
3,138
21%
Short-term investments
2,371
2,319
2%
Accounts receivable, net
3,677
3,241
13%
Inventories
5,055
4,838
4%
Prepaid expenses and other current assets
1,150
1,489
-23%
Total current assets
16,061
15,025
7%
Property, plant and equipment, net
3,989
3,520
13%
Identifiable intangible assets, net
283
281
1%
Goodwill
139
131
6%
Deferred income taxes and other assets
2,787
2,422
15%
TOTAL ASSETS
$
23,259
$
21,379
9%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
6
$
44
-86%
Notes payable
325
1
--
Accounts payable
2,048
2,191
-7%
Accrued liabilities
3,011
3,037
-1%
Income taxes payable
84
85
-1%
Total current liabilities
5,474
5,358
2%
Long-term debt
3,471
1,993
74%
Deferred income taxes and other liabilities
1,907
1,770
8%
Redeemable preferred stock
--
--
--
Shareholders’ equity
12,407
12,258
1%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
23,259
$
21,379
9%
NIKE, Inc.
DIVISIONAL REVENUES
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED
%
Currency
TWELVE MONTHS ENDED
%
Currency
(Dollars in millions)
5/31/2017
5/31/2016
Change
Changes(1)
5/31/2017
5/31/2016
Change
Changes(1)
North America
Footwear
$
2,457
$
2,367
4 %
4 %
$
9,684
$
9,299
4 %
4 %
Apparel
1,142
1,163
-2 %
-2 %
4,886
4,746
3 %
3 %
Equipment
154
205
-25 %
-25 %
646
719
-10 %
-10 %
Total
3,753
3,735
0 %
1 %
15,216
14,764
3 %
3 %
Western Europe
Footwear
1,066
1,027
4 %
11 %
4,068
3,985
2 %
7 %
Apparel
438
411
7 %
15 %
1,868
1,628
15 %
21 %
Equipment
60
64
-6 %
1 %
275
271
1 %
7 %
Total
1,564
1,502
4 %
12 %
6,211
5,884
6 %
11 %
Central & Eastern Europe
Footwear
233
224
4 %
9 %
927
882
5 %
9 %
Apparel
103
102
1 %
2 %
471
463
2 %
4 %
Equipment
21
19
11 %
11 %
89
86
3 %
6 %
Total
357
345
3 %
6 %
1,487
1,431
4 %
7 %
Greater China
Footwear
765
681
12 %
18 %
2,920
2,599
12 %
18 %
Apparel
293
268
9 %
14 %
1,188
1,055
13 %
18 %
Equipment
29
30
-3 %
-3 %
129
131
-2 %
3 %
Total
1,087
979
11 %
16 %
4,237
3,785
12 %
17 %
Japan
Footwear
196
187
5 %
4 %
666
570
17 %
7 %
Apparel
78
70
11 %
11 %
275
228
21 %
10 %
Equipment
21
23
-9 %
-10 %
73
71
3 %
-6 %
Total
295
280
5 %
5 %
1,014
869
17 %
7 %
Emerging Markets
Footwear
756
596
27 %
24 %
2,816
2,536
11 %
17 %
Apparel
247
226
9 %
6 %
966
947
2 %
8 %
Equipment
50
50
0 %
-3 %
213
218
-2 %
2 %
Total
1,053
872
21 %
18 %
3,995
3,701
8 %
14 %
Global Brand Divisions(2)
18
12
50 %
68 %
73
73
0 %
2 %
TOTAL NIKE BRAND
8,127
7,725
5 %
7 %
32,233
30,507
6 %
8 %
Converse
554
513
8 %
10 %
2,042
1,955
4 %
6 %
Corporate(3)
(4 )
6
--
--
75
(86 )
--
--
TOTAL NIKE, INC. REVENUES
$
8,677
$
8,244
5 %
7 %
$
34,350
$
32,376
6 %
8 %
TOTAL NIKE BRAND
Footwear
$
5,473
$
5,082
8 %
10 %
$
21,081
$
19,871
6 %
8 %
Apparel
2,301
2,240
3 %
4 %
9,654
9,067
6 %
9 %
Equipment
335
391
-14 %
-14 %
1,425
1,496
-5 %
-3 %
Global Brand Divisions(2)
18
12
50 %
68 %
73
73
0 %
2 %
(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.
SUPPLEMENTAL NIKE BRAND REVENUE DETAILS
% Change
Excluding
TWELVE MONTHS ENDED
Currency
(Dollars in millions)
5/31/2017
5/31/2016(1)
% Change
Changes(2)
NIKE Brand Revenues by:
Sales to Wholesale Customers
$ 23,078
$ 22,577
2%
5%
Sales Direct to Consumer
9,082
7,857
16%
18%
Global Brand Divisions(3)
73
73
0%
2%
TOTAL NIKE BRAND REVENUES
$ 32,233
$ 30,507
6%
8%
NIKE Brand Revenues on a Wholesale Equivalent Basis:(4)
Sales to Wholesale Customers
$ 23,078
$ 22,577
2%
5%
Sales from our Wholesale Operations to Direct to Consumer Operations
5,616
4,672
20%
22%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES
$ 28,694
$ 27,249
5%
8%
NIKE Brand Wholesale Equivalent Revenues by:(4)
Men’s
$ 16,041
$ 15,410
4%
6%
Women’s
6,644
6,296
6%
8%
Young Athletes’
4,838
4,560
6%
8%
Others(5)
1,171
983
19%
21%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES
$ 28,694
$ 27,249
5%
8%
NIKE Brand Wholesale Equivalent Revenues by:(4)
Running
$
5,278
$
5,017
5%
8%
NIKE Basketball
1,292
1,378
-6%
-5%
Jordan Brand
3,099
2,753
13%
13%
Football (Soccer)
1,987
2,143
-7%
-4%
Men’s Training
2,617
2,611
0%
1%
Women’s Training
1,265
1,344
-6%
-4%
Action Sports
596
655
-9%
-7%
Sportswear
8,587
7,513
14%
17%
Golf
579
706
-18%
-18%
Others(6)
3,394
3,129
8%
11%
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES
$ 28,694
$ 27,249
5%
8%
(1) Certain prior year amounts have been reclassified to
conform to fiscal 2017 presentation. These changes had no impact
on previously reported results of operations or shareholders’
equity.
(2) 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.
(3) Global Brand Divisions revenues are primarily
attributable to NIKE Brand licensing businesses that are not part
of a geographic operating segment.
(4) References to NIKE Brand wholesale equivalent
revenues, which are considered non-GAAP financial measures, are
intended to provide context as to the total size of our NIKE Brand
market footprint if we had no Direct to Consumer operations. NIKE
Brand wholesale equivalent revenues consist of 1) sales to
external wholesale customers and 2) internal sales from our
wholesale operations to our Direct to Consumer operations which
are charged at prices that are comparable to prices charged to
external wholesale customers.
(5) Others include all unisex products, equipment and
other products not allocated to Men’s, Women’s and Young
Athletes’, as well as certain adjustments that are not allocated
to products designated by gender or age.
(6) Others include all other categories and certain
adjustments that are not allocated at the category level.
NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES(1)
THREE MONTHS ENDED
%
TWELVE MONTHS ENDED
%
(Dollars in millions)
5/31/2017
5/31/2016
Change
5/31/2017
5/31/2016
Change
North America
$
979
$
936
5 %
$
3,875
$
3,763
3 %
Western Europe
285
308
-7 %
1,203
1,434
-16 %
Central & Eastern Europe
48
46
4 %
244
289
-16 %
Greater China
380
357
6 %
1,507
1,372
10 %
Japan
77
55
40 %
224
174
29 %
Emerging Markets
215
191
13 %
816
892
-9 %
Global Brand Divisions(2)
(689 )
(722 )
5 %
(2,677 )
(2,596 )
-3 %
TOTAL NIKE BRAND
1,295
1,171
11 %
5,192
5,328
-3 %
Converse
137
128
7 %
477
487
-2 %
Corporate(3)
(246 )
(221 )
-11 %
(724 )
(1,173 )
38 %
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES
1,186
1,078
10 %
4,945
4,642
7 %
Interest expense (income), net
18
5
--
59
19
--
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
$
1,168
$
1,073
9 %
$
4,886
$
4,623
6 %
(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) 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.

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SOURCE: NIKE, Inc.

NIKE, Inc.
Investor Contact:
Nitesh Sharan, 503-532-2828
or
Media Contact:
Kellie Leonard, 503-671-6171