NKE
$68.16
Nike
$1.03
1.53%
Earnings Details
2nd Quarter November 2017
Thursday, December 21, 2017 4:15:00 PM
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Summary

Nike Beats

Nike (NKE) reported 2nd Quarter November 2017 earnings of $0.46 per share on revenue of $8.6 billion. The consensus earnings estimate was $0.39 per share on revenue of $8.4 billion. The Earnings Whisper number was $0.44 per share. Revenue grew 4.6% 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
$0.46
Earnings Whisper
$0.44
Consensus Estimate
$0.39
Reported Revenue
$8.55 Bil
Revenue Estimate
$8.39 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIKE, Inc. Reports Fiscal 2018 Second Quarter Results

NIKE, Inc. (NKE) today reported financial results for its fiscal 2018 second quarter ended November 30, 2017. For the quarter, revenue growth was driven by international geographies and continued strength in NIKE Direct, which was partly offset by an expected decline in North America wholesale revenue.

Diluted earnings per share were $0.46, down 8 percent compared to the same period last year due primarily to a decline in gross margin and higher selling and administrative expense, which offset solid revenue growth, a lower tax rate and a lower average share count.

"This quarter, led by our Consumer Direct Offense, we accelerated international growth and built underlying momentum in our domestic business," said Mark Parker, Chairman, President and CEO, NIKE, Inc. "For the back half of the fiscal year, NIKE’s innovation line-up is as strong as it’s ever been and we’ll continue to actively shape retail through new differentiated experiences."*

Second Quarter Income Statement Review

Revenues for NIKE, Inc. increased 5 percent to $8.6 billion, up 3 percent on a currency-neutral basis.** -- Revenues for the NIKE Brand were $8.1 billion, up 4 percent on a constant-currency basis, driven by EMEA, Greater China and APLA, including growth in the Sportswear and NIKE Basketball categories.

Revenues for Converse were $408 million, down 4 percent on a currency-neutral basis, as international growth was more than offset by declines in North America.

Gross margin declined 120 basis points to 43.0 percent, as higher average selling prices were more than offset by unfavorable changes in foreign currency exchange rates and, to a lesser extent, higher product costs per unit.

Selling and administrative expense increased 10 percent to $2.8 billion. Demand creation expense was $877 million, up 15 percent, primarily driven by higher sports marketing and advertising costs. Operating overhead expense increased 8 percent to $1.9 billion, due largely to higher administrative costs and continued investments in NIKE Direct.

Other expense, net was $18 million as net foreign currency exchange losses were partially offset by non-operating items.

The effective tax rate was 12.7 percent, compared to 24.4 percent for the same period last year, reflecting the tax benefit from stock-based compensation in the current period, as well as an increase in the mix of earnings from operations outside of the U.S., which are generally subject to a lower tax rate.

Net income decreased 9 percent to $767 million as a decline in gross margin and higher selling and administrative expense more than offset revenue growth and a lower tax rate, while diluted earnings per share decreased 8 percent from the prior year to $0.46, including a 2 percent decline in the weighted average diluted common shares outstanding.

November 30, 2017 Balance Sheet Review

Inventories for NIKE, Inc. were $5.3 billion, up 6 percent from November 30, 2016, driven primarily by changes in foreign currency exchange rates and, to a lesser extent, an increase in NIKE Brand units.

Cash and equivalents and short-term investments were $6.4 billion, $446 million higher than last year due to net income, and proceeds from debt issuance and employee exercises of stock options, which more than offset share repurchases, dividends and investments in infrastructure.

Share Repurchases

During the second quarter, NIKE, Inc. repurchased a total of 16.7 million shares for approximately $902 million as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. As of November 30, 2017, a total of 111.8 million shares had been repurchased under this program for approximately $6.2 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 21, 2017, to review fiscal second 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, January 4, 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
%
SIX MONTHS ENDED
%
(Dollars in millions, except per share data)
11/30/2017
11/30/2016
Change
11/30/2017
11/30/2016
Change
Revenues
$
8,554
$
8,180
5 %
$
17,624
$
17,241
2 %
Cost of sales
4,876
4,564
7 %
9,984
9,502
5 %
Gross profit
3,678
3,616
2 %
7,640
7,739
-1 %
Gross margin
43.0 %
44.2 %
43.3 %
44.9 %
Demand creation expense
877
762
15 %
1,732
1,803
-4 %
Operating overhead expense
1,891
1,743
8 %
3,892
3,599
8 %
Total selling and administrative expense
2,768
2,505
10 %
5,624
5,402
4 %
% of revenues
32.4 %
30.6 %
31.9 %
31.3 %
Interest expense (income), net
13
15
--
29
22
--
Other expense (income), net
18
(18 )
--
36
(80 )
--
Income before income taxes
879
1,114
-21 %
1,951
2,395
-19 %
Income tax expense
112
272
-59 %
234
304
-23 %
Effective tax rate
12.7 %
24.4 %
12.0 %
12.7 %
NET INCOME
$
767
$
842
-9 %
$
1,717
$
2,091
-18 %
Earnings per common share:
Basic
$
0.47
$
0.51
-8 %
$
1.05
$
1.26
-17 %
Diluted
$
0.46
$
0.50
-8 %
$
1.03
$
1.23
-16 %
Weighted average common shares outstanding:
Basic
1,627.0
1,659.1
1,633.1
1,665.6
Diluted
1,660.9
1,693.2
1,669.1
1,701.3
Dividends declared per common share
$
0.20
$
0.18
$
0.38
$
0.34
NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
November 30,
November 30,
(Dollars in millions)
2017
2016
% Change
ASSETS
Current assets:
Cash and equivalents
$
4,304
$
4,339
-1 %
Short-term investments
2,085
1,604
30 %
Accounts receivable, net
3,613
3,478
4 %
Inventories
5,326
5,033
6 %
Prepaid expenses and other current assets
1,254
1,557
-19 %
Total current assets
16,582
16,011
4 %
Property, plant and equipment, net
4,117
3,566
15 %
Identifiable intangible assets, net
282
283
0 %
Goodwill
139
139
0 %
Deferred income taxes and other assets
2,935
2,653
11 %
TOTAL ASSETS
$
24,055
$
22,652
6 %
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
10
$
44
-77 %
Notes payable
1,229
20
--
Accounts payable
2,141
2,033
5 %
Accrued liabilities
3,278
3,076
7 %
Income taxes payable
92
52
77 %
Total current liabilities
6,750
5,225
29 %
Long-term debt
3,472
3,473
0 %
Deferred income taxes and other liabilities
2,075
1,631
27 %
Redeemable preferred stock
--
--
--
Shareholders’ equity
11,758
12,323
-5 %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
24,055
$
22,652
6 %
NIKE, Inc.
DIVISIONAL REVENUES(1)
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED
%
Currency
SIX MONTHS ENDED
%
Currency
(Dollars in millions)
11/30/2017
11/30/2016
Change
Changes(2)
11/30/2017
11/30/2016
Change
Changes(2)
North America
Footwear
$ 2,070
$ 2,219
-7 %
-7 %
$
4,504
$
4,737
-5 %
-5 %
Apparel
1,279
1,273
0 %
0 %
2,578
2,590
0 %
-1 %
Equipment
136
158
-14 %
-14 %
327
354
-8 %
-8 %
Total
3,485
3,650
-5 %
-5 %
7,409
7,681
-4 %
-4 %
Europe, Middle East & Africa
Footwear
1,290
1,116
16 %
11 %
2,761
2,573
7 %
6 %
Apparel
743
588
26 %
21 %
1,486
1,272
17 %
15 %
Equipment
100
88
14 %
10 %
230
209
10 %
9 %
Total
2,133
1,792
19 %
14 %
4,477
4,054
10 %
9 %
Greater China
Footwear
793
669
19 %
17 %
1,554
1,379
13 %
14 %
Apparel
397
355
12 %
11 %
706
624
13 %
14 %
Equipment
32
31
3 %
0 %
70
72
-3 %
-2 %
Total
1,222
1,055
16 %
15 %
2,330
2,075
12 %
13 %
Asia Pacific & Latin America
Footwear
873
818
7 %
9 %
1,700
1,605
6 %
8 %
Apparel
342
319
7 %
10 %
643
598
8 %
10 %
Equipment
58
69
-16 %
-15 %
119
134
-11 %
-10 %
Total
1,273
1,206
6 %
8 %
2,462
2,337
5 %
7 %
Global Brand Divisions(3)
23
21
10 %
19 %
43
36
19 %
17 %
TOTAL NIKE BRAND
8,136
7,724
5 %
4 %
16,721
16,183
3 %
3 %
Converse
408
416
-2 %
-4 %
891
990
-10 %
-11 %
Corporate(4)
10
40
--
--
12
68
--
--
TOTAL NIKE, INC. REVENUES
$ 8,554
$ 8,180
5 %
3 %
$ 17,624
$ 17,241
2 %
2 %
TOTAL NIKE BRAND
Footwear
$ 5,026
$ 4,822
4 %
3 %
$ 10,519
$ 10,294
2 %
2 %
Apparel
2,761
2,535
9 %
8 %
5,413
5,084
6 %
6 %
Equipment
326
346
-6 %
-7 %
746
769
-3 %
-3 %
Global Brand Divisions(3)
23
21
10 %
19 %
43
36
19 %
17 %
TOTAL NIKE BRAND REVENUES
$ 8,136
$ 7,724
5 %
4 %
$ 16,721
$ 16,183
3 %
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 TAXES(1,2)
THREE MONTHS ENDED
%
SIX MONTHS ENDED
%
(Dollars in millions)
11/30/2017
11/30/2016
Change
11/30/2017
11/30/2016
Change
North America
$
783
$
912
-14 %
$
1,785
$
1,916
-7 %
Europe, Middle East & Africa
337
313
8 %
788
798
-1 %
Greater China
378
375
1 %
772
746
3 %
Asia Pacific & Latin America
291
266
9 %
551
475
16 %
Global Brand Divisions(3)
(602 )
(619 )
3 %
(1,277 )
(1,390 )
8 %
TOTAL NIKE BRAND
1,187
1,247
-5 %
2,619
2,545
3 %
Converse
48
78
-38 %
137
231
-41 %
Corporate(4)
(343 )
(196 )
-75 %
(776 )
(359 )
-116 %
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES
892
1,129
-21 %
1,980
2,417
-18 %
Interest expense (income), net
13
15
--
29
22
--
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES
$
879
$ 1,114
-21 %
$
1,951
$
2,395
-19 %
(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.

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SOURCE: NIKE, Inc.

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