NKE
$80.44
Nike
($2.87)
(3.44%)
Earnings Details
Quarter May 2019
Thursday, June 27, 2019 4:15:00 PM
Tweet Share Watch
Summary

Nike Misses

Nike (NKE) reported Quarter May 2019 earnings of $0.62 per share on revenue of $10.2 billion. The consensus earnings estimate was $0.66 per share on revenue of $10.2 billion. The Earnings Whisper number was $0.71 per share. Revenue grew 4.0% 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
$0.62
Earnings Whisper
$0.71
Consensus Estimate
$0.66
Reported Revenue
$10.18 Bil
Revenue Estimate
$10.16 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

NIKE, Inc. Reports Fiscal 2019 Fourth Quarter and Full Year Results

BEAVERTON, Ore.--(BUSINESS WIRE)--NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2019 fourth quarter and full year ended May 31, 2019.

Fourth quarter revenue increased to $10.2 billion, up 4 percent on a reported basis and up 10 percent on a currency-neutral basis*. Full year revenue rose to $39.1 billion, up 7 percent on a reported basis and up 11 percent on a currency-neutral basis, as strategic investments in innovation and digital drove global consumer demand led by NIKE Direct in both periods.

“FY19 was a pivotal year for NIKE as we continue to bring our Consumer Direct Offense to life throughout the marketplace,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our distinctive innovation and digital advantage led to accelerated growth across our complete portfolio, while our Brand fueled deeper relationships with consumers around the globe.”**

Diluted earnings per share in the fourth quarter was $0.62 driven by revenue growth, strong gross margin expansion, and a lower average share count, partially offset by higher selling and administrative expense and a higher tax rate. Diluted earnings per share for the full year was $2.49.

“Reflecting on our FY19 performance, it is clear that growth is paramount at NIKE, and that our strong growth is being driven by strategic transformation,” said Andy Campion, Executive Vice President and CFO, NIKE, Inc. “Amid foreign exchange volatility, our double-digit currency-neutral revenue growth and expanding ROIC showcase NIKE’s unrivaled ability to create extraordinary value for consumers and shareholders over the long term.”**

Fourth Quarter Income Statement Review

  • Revenues for NIKE, Inc. increased 4 percent to $10.2 billion, up 10 percent on a currency-neutral basis.
    • Revenues for the NIKE Brand were $9.7 billion, up 10 percent on a currency-neutral basis, driven by growth across NIKE Direct and wholesale, key categories including Sportswear, Jordan and Basketball, and continued growth across footwear and apparel.
    • Revenues for Converse were $491 million, flat to prior year on a currency-neutral basis, mainly driven by double-digit growth in Asia and digital which was offset by declines in the U.S. and Europe.
  • Gross margin increased 80 basis points to 45.5 percent due primarily to higher average selling prices, impacts from foreign currency, and growth in NIKE Direct. These benefits were partially offset by higher product costs and supply chain investments.
  • Selling and administrative expense increased 9 percent to $3.4 billion. Demand creation expense was $1.0 billion, up 3 percent to prior year due to global brand campaigns and key sports moments. Operating overhead expense increased 12 percent to $2.4 billion driven primarily by wage-related and administrative expenses, which reflect critical investments in innovation, data and analytics, and new capabilities to accelerate our end-to-end digital transformation.
  • The effective tax rate was 20.4 percent, compared to 6.4 percent for the same period last year, due to several discrete impacts within the prior period, including adjustments to the provisional charges related to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”).
  • Net income was $989 million and diluted earnings per share was $0.62 driven by strong revenue growth, gross margin expansion, and a lower average share count, which were slightly offset by higher selling and administrative expense and a higher tax rate.

Fiscal 2019 Income Statement Review

  • Revenues for NIKE, Inc. rose 7 percent to $39.1 billion, up 11 percent on a currency-neutral basis.
    • Revenues for the NIKE Brand were $37.2 billion, up 11 percent on a currency-neutral basis driven by growth across NIKE Direct and wholesale, key categories including Sportswear, Jordan and Running, and double-digit growth across footwear and apparel.
    • NIKE Direct revenues were $11.8 billion, up 16 percent on a currency-neutral basis, driven by a 35 percent increase in digital commerce sales, 6 percent growth in comparable store sales as well as the addition of new stores. Sales to wholesale customers increased 10%.
    • Revenues for Converse were $1.9 billion, up 3 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and digital which was partially offset by declines in the U.S. and Europe.
  • Gross margin increased 90 basis points to 44.7 percent due primarily to higher average selling prices, impacts from foreign currency, and growth in NIKE Direct. These benefits were partially offset by higher product costs.
  • Selling and administrative expense increased 10 percent to $12.7 billion. Demand creation expense was $3.8 billion, up 5 percent to prior year due to sports marketing investments, global brand campaigns, key sports moments and new product launches. Operating overhead expense increased 13 percent to $8.9 billion driven primarily by wage-related and administrative expenses, which reflect critical investments in innovation, data and analytics, and new capabilities to accelerate our end-to-end digital transformation.
  • The effective tax rate was 16.1 percent, compared to 55.3 percent for the same period last year, due to significant charges related to the enactment of the Tax Act in the prior year.
  • Net income increased to $4.0 billion and diluted earnings per share was $2.49 driven by strong revenue growth, gross margin expansion, a lower average share count and a lower tax rate, which was partially offset by higher selling and administrative expense.

May 31, 2019 Balance Sheet Review

  • Inventories for NIKE, Inc. were $5.6 billion, up 7 percent compared to the prior year period, with healthy inventory levels across all geographies.
  • Cash and equivalents and short-term investments were $4.7 billion, $582 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income.

Share Repurchases

During the fourth quarter, NIKE, Inc. repurchased 10.6 million shares for approximately $897 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of May 31, 2019, a total of 11.6 million had been repurchased under this program for approximately $986 million.

In fiscal 2019, NIKE, Inc. repurchased a total of 54.3 million shares for approximately $4.3 billion under the above mentioned $15 billion program currently in use as well as the previous $12 billion program approved by the Board of Directors in November 2015.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on June 27, 2019, to review fiscal fourth quarter and full year 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, July 11, 2019.

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.

*

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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
THREE MONTHS ENDED%TWELVE MONTHS ENDED%
(Dollars in millions, except per share data)5/31/20195/31/2018Change5/31/20195/31/2018Change
Revenues

$

10,184

$

9,789

4%

$

39,117

$

36,397

7%

Cost of sales

 

5,551

 

5,411

3%

 

21,643

 

20,441

6%

Gross profit

 

4,633

 

4,378

6%

 

17,474

 

15,956

10%

Gross margin

 

45.5%

 

44.7%

 

44.7%

 

43.8%

 
Demand creation expense

 

1,014

 

983

3%

 

3,753

 

3,577

5%

Operating overhead expense

 

2,392

 

2,137

12%

 

8,949

 

7,934

13%

Total selling and administrative expense

 

3,406

 

3,120

9%

 

12,702

 

11,511

10%

% of revenues

 

33.4%

 

31.9%

 

32.5%

 

31.6%

 
Interest expense (income), net

 

12

 

12

 

49

 

54

Other (income) expense, net

 

(28)

 

31

 

(78)

 

66

Income before income taxes

 

1,243

 

1,215

2%

 

4,801

 

4,325

11%

Income tax expense

 

254

 

78

226%

 

772

 

2,392

-68%

Effective tax rate

 

20.4%

 

6.4%

 

16.1%

 

55.3%

 
NET INCOME

$

989

$

1,137

-13%

$

4,029

$

1,933

108%

 
Earnings per common share:
Basic

$

0.63

$

0.71

-11%

$

2.55

$

1.19

114%

Diluted

$

0.62

$

0.69

-10%

$

2.49

$

1.17

113%

 
Weighted average common shares outstanding:
Basic

 

1,570.2

 

1,605.7

 

1,579.7

 

1,623.8

Diluted

 

1,607.5

 

1,641.2

 

1,618.4

 

1,659.1

 
Dividends declared per common share

$

0.22

$

0.20

$

0.86

$

0.78

NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

May 31,

May 31,

% Change

(Dollars in millions)

2019

2018

ASSETS
Current assets:
Cash and equivalents

$

4,466

$

4,249

5 %

Short-term investments

 

197

 

996

-80 %

Accounts receivable, net

 

4,272

 

3,498

22 %

Inventories

 

5,622

 

5,261

7 %

Prepaid expenses and other current assets

 

1,968

 

1,130

74 %

Total current assets

 

16,525

 

15,134

9 %

Property, plant and equipment, net

 

4,744

 

4,454

7 %

Identifiable intangible assets, net

 

283

 

285

-1 %

Goodwill

 

154

 

154

0 %

Deferred income taxes and other assets

 

2,011

 

2,509

-20 %

TOTAL ASSETS

$

23,717

$

22,536

5 %

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt

$

6

$

6

0 %

Notes payable

 

9

 

336

-97 %

Accounts payable

 

2,612

 

2,279

15 %

Accrued liabilities

 

5,010

 

3,269

53 %

Income taxes payable

 

229

 

150

53 %

Total current liabilities

 

7,866

 

6,040

30 %

Long-term debt

 

3,464

 

3,468

0 %

Deferred income taxes and other liabilities

 

3,347

 

3,216

4 %

Redeemable preferred stock

Shareholders' equity

 

9,040

 

9,812

-8 %

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

23,717

$

22,536

5 %

NIKE, Inc.

DIVISIONAL REVENUES

(Unaudited)

 

 

 

 

 

% Change
Excluding
Currency
Changes1

 

% Change
Excluding
Currency
Changes1

THREE MONTHS ENDED

%

TWELVE MONTHS ENDED

%

(Dollars in millions)5/31/20195/31/2018

Change

5/31/20195/31/2018

Change

North America

 

 

 

 

Footwear

$

2,736

$

2,525

8 %

9 %

$

10,045

$

9,322

8 %

8 %

Apparel

 

1,275

 

1,207

6 %

6 %

 

5,260

 

4,938

7 %

7 %

Equipment

 

154

 

143

8 %

7 %

 

597

 

595

—%

—%

Total

 

4,165

 

3,875

7 %

8 %

 

15,902

 

14,855

7 %

7 %

Europe, Middle East & Africa

 

 

 

 

Footwear

 

1,643

 

1,625

1 %

11 %

 

6,293

 

5,875

7 %

12 %

Apparel

 

713

 

741

-4 %

5 %

 

3,087

 

2,940

5 %

9 %

Equipment

 

101

 

100

1 %

10 %

 

432

 

427

1 %

5 %

Total

 

2,457

 

2,466

—%

9 %

 

9,812

 

9,242

6 %

11 %

Greater China

 

 

 

 

Footwear

 

1,167

 

1,003

16 %

23 %

 

4,262

 

3,496

22 %

25 %

Apparel

 

494

 

434

14 %

21 %

 

1,808

 

1,508

20 %

23 %

Equipment

 

36

 

31

16 %

20 %

 

138

 

130

6 %

8 %

Total

 

1,697

 

1,468

16 %

22 %

 

6,208

 

5,134

21 %

24 %

Asia Pacific & Latin America

 

 

 

 

Footwear

 

953

 

991

-4 %

9 %

 

3,622

 

3,575

1 %

12 %

Apparel

 

363

 

383

-5 %

8 %

 

1,395

 

1,347

4 %

15 %

Equipment

 

63

 

62

2 %

15 %

 

237

 

244

-3 %

8 %

Total

 

1,379

 

1,436

-4 %

9 %

 

5,254

 

5,166

2 %

13 %

Global Brand Divisions2

 

9

 

24

-63 %

-64 %

 

42

 

88

-52 %

-53 %

TOTAL NIKE BRAND

 

9,707

 

9,269

5 %

10 %

 

37,218

 

34,485

8 %

11 %

Converse

 

491

 

512

-4 %

—%

 

1,906

 

1,886

1 %

3 %

Corporate3

 

(14)

 

8

 

(7)

 

26

TOTAL NIKE, INC. REVENUES

$

10,184

$

9,789

4 %

10 %

$

39,117

$

36,397

7 %

11 %

 

 

 

 

TOTAL NIKE BRAND

 

 

 

 

Footwear

$

6,499

$

6,144

6 %

12 %

$

24,222

$

22,268

9 %

12 %

Apparel

 

2,845

 

2,765

3 %

8 %

 

11,550

 

10,733

8 %

11 %

Equipment

 

354

 

336

5 %

11 %

 

1,404

 

1,396

1 %

4 %

Global Brand Divisions2

 

9

 

24

-63 %

-64 %

 

42

 

88

-52 %

-53 %

TOTAL NIKE BRAND REVENUES

$

9,707

$

9,269

5 %

10 %

$

37,218

$

34,485

8 %

11 %

1The percent 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.
2Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment.
3Corporate revenues consist primarily 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 the Company's central foreign exchange risk management program.
NIKE, Inc.
SUPPLEMENTAL NIKE BRAND REVENUE DETAILS
(Unaudited)
% Change
Excluding
Currency
Changes2
 
TWELVE MONTHS ENDED% Change
(Dollars in millions)5/31/20195/31/20181
NIKE Brand Revenues by:
Sales to Wholesale Customers

$

25,423

$

23,969

6

%

10

%

Sales through NIKE Direct

 

11,753

 

10,428

13

%

16

%

Global Brand Divisions3

 

42

 

88

-52

%

-53

%

TOTAL NIKE BRAND REVENUES

$

37,218

$

34,485

8

%

11

%

 
NIKE Brand Revenues on a Wholesale Equivalent Basis:4
Sales to Wholesale Customers

$

25,423

$

23,969

6

%

10

%

Sales from our Wholesale Operations to NIKE Direct Operations

 

7,127

 

6,332

13

%

16

%

TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES

$

32,550

$

30,301

7

%

11

%

 
NIKE Brand Wholesale Equivalent Revenues by:4
Men’s

$

17,737

$

16,698

6

%

10

%

Women’s

 

7,380

 

6,913

7

%

11

%

NIKE Kids’

 

5,283

 

4,906

8

%

11

%

Others5

 

2,150

 

1,784

21

%

25

%

TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES

$

32,550

$

30,301

7

%

11

%

 
NIKE Brand Wholesale Equivalent Revenues by:4
Running

$

4,488

$

4,496

0

%

4

%

NIKE Basketball

 

1,597

 

1,494

7

%

9

%

Jordan Brand

 

3,138

 

2,856

10

%

12

%

Football (Soccer)

 

1,894

 

2,146

-12

%

-6

%

Training

 

3,137

 

3,126

0

%

3

%

Sportswear

 

12,442

 

10,720

16

%

21

%

Others6

 

5,854

 

5,463

7

%

9

%

TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES

$

32,550

$

30,301

7

%

11

%

1 Certain prior year amounts have been reclassified to conform to fiscal 2019 presentation. These changes had no impact on previously reported consolidated results of operations or shareholders’ equity.
2 The percent 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 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 the Company’s NIKE Brand market footprint if it had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of 1) sales to external wholesale customers and 2) internal sales from the Company’s wholesale operations to its NIKE Direct 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 NIKE Kids’, 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 TAXES1
(Unaudited)
 
THREE MONTHS ENDED%TWELVE MONTHS ENDED%
(Dollars in millions)5/31/20195/31/2018Change5/31/20195/31/2018Change
North America

$

1,048

 

$

975

 

7

%

$

3,925

 

$

3,600

 

9

%

Europe, Middle East & Africa

 

506

 

 

382

 

32

%

 

1,995

 

 

1,587

 

26

%

Greater China

 

674

 

 

539

 

25

%

 

2,376

 

 

1,807

 

31

%

Asia Pacific & Latin America

 

340

 

 

340

 

0

%

 

1,323

 

 

1,189

 

11

%

Global Brand Divisions2

 

(830

)

 

(732

)

-13

%

 

(3,262

)

 

(2,658

)

-23

%

TOTAL NIKE BRAND

 

1,738

 

 

1,504

 

16

%

 

6,357

 

 

5,525

 

15

%

Converse

 

82

 

 

104

 

-21

%

 

303

 

 

310

 

-2

%

Corporate3

 

(565

)

 

(381

)

-48

%

 

(1,810

)

 

(1,456

)

-24

%

TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES

 

1,255

 

 

1,227

 

2

%

 

4,850

 

 

4,379

 

11

%

Interest expense (income), net

 

12

 

 

12

 

 

49

 

 

54

 

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES

$

1,243

 

$

1,215

 

2

%

$

4,801

 

$

4,325

 

11

%

1The 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.
2Global 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.
3Corporate consists primarily 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.

 

Investor Contact:
Nitesh Sharan
(503) 532-2828

Media Contact:
Mark Rhodes
(503) 532-8877

Source: NIKE, Inc.