NKE
$72.13
Nike
$.79
1.11%
Earnings Details
3rd Quarter February 2018
Thursday, March 22, 2018 4:15:00 PM
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Summary

Nike Beats

Nike (NKE) reported 3rd Quarter February 2018 earnings of $0.68 per share on revenue of $9.0 billion. The consensus earnings estimate was $0.52 per share on revenue of $8.8 billion. The Earnings Whisper number was $0.58 per share. Revenue grew 6.5% 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
$0.68
Earnings Whisper
$0.58
Consensus Estimate
$0.52
Reported Revenue
$8.98 Bil
Revenue Estimate
$8.83 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIKE, Inc. Reports Fiscal 2018 Third Quarter Results

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.

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

Source: NIKE, Inc.