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NIKE, Inc. Reports Fiscal 2020 First Quarter Results

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NIKE, Inc. (NYSE:NKE) today reported fiscal 2020 financial results for its first quarter ended August 31, 2019.

Revenue increased to $10.7 billion in the first quarter, up 7 percent on a reported basis and up 10 percent on a currency-neutral basis*, driven by growth across all geographies.

"Our strong start to FY20 highlighted the depth and balance of NIKE's complete offense," said Mark Parker, Chairman, President and CEO, NIKE, Inc. "NIKE's strong product innovation, combined with our industry-leading digital experiences, continue to deepen our consumer relationships around the world."**

Diluted earnings per share for the quarter was $0.86, an increase of 28 percent driven primarily by strong revenue growth and gross margin expansion.

"Our targeted strategic investments are accelerating NIKE's digital transformation and extending our competitive advantage," said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. "Even amidst the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus on better serving the consumer to continue fueling strong, broad-based growth across our global portfolio."**

First Quarter Income Statement Review

  • Revenues for NIKE, Inc. increased 7 percent to $10.7 billion, up 10 percent on a currency-neutral basis.
    • Revenues for the NIKE Brand were $10.1 billion, up 10 percent on a currency-neutral basis driven by growth across NIKE Direct and wholesale, key categories including Sportswear and the Jordan Brand, and continued growth across footwear and apparel.
    • Revenues for Converse were $555 million, up 8 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and through digital globally, which was partially offset by declines in the U.S.
  • Gross margin increased 150 basis points to 45.7 percent primarily due to higher average selling prices and margin expansion in NIKE Direct, partially offset by impacts from changes in foreign currency exchange rates and higher product costs.
  • Selling and administrative expense increased 9 percent to $3.3 billion. Demand creation expense was $1.0 billion, up 6 percent primarily driven by higher advertising expenses and sports marketing investments. Operating overhead expense increased 10 percent to $2.3 billion driven by continued investments in transformational capabilities, particularly in NIKE Direct and global operations.
  • The effective tax rate was 12.4 percent, compared to 14 percent for the same period last year, primarily due to discrete items which favorably impacted the quarter.
  • Net income increased 25 percent to $1.4 billion driven primarily by strong revenue growth and gross margin expansion while diluted earnings per share increased 28 percent to $0.86 reflecting a 2 percent decline in the weighted average diluted common shares outstanding.

August 31, 2019 Balance Sheet Review

  • Inventories for NIKE, Inc. were $5.8 billion, up 12 percent compared to the prior year period, reflecting strong consumer demand globally, and to a lesser extent, the impact from changes in foreign currency exchange rates.
  • Cash and equivalents and short-term investments were $3.6 billion, $625 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income.

NIKE, Inc. adopted Accounting Standards Update No. 2016-02 Leases (Topic 842) in the first quarter. In connection with the adoption, the Company's balance sheet as of August 31, 2019 reflects the addition of operating lease right-of-use assets and operating lease liabilities.

Share Repurchases

During the first quarter, NIKE, Inc. repurchased 11.9 million shares for approximately $995 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of August 31, 2019, a total of 23.5 million shares had been repurchased under this program for approximately $2.0 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 24, 2019, to review fiscal first quarter results. The conference call will be broadcast live via 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, October 1, 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.

(Tables Follow)

NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 

THREE MONTHS ENDED

 

%

(Dollars in millions, except per share data)

8/31/2019

 

8/31/2018

 

Change

Revenues

$

10,660

 

$

9,948

 

7

%

Cost of sales

 

5,789

 

 

5,551

 

4

%

Gross profit

 

4,871

 

 

4,397

 

11

%

Gross margin

 

45.7

%

 

44.2

%

 
Demand creation expense

 

1,018

 

 

964

 

6

%

Operating overhead expense

 

2,310

 

 

2,099

 

10

%

Total selling and administrative expense

 

3,328

 

 

3,063

 

9

%

% of revenues

 

31.2

%

 

30.8

%

 
Interest expense (income), net

 

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