NIKE, Inc. (NYSE:NKE) today reported fiscal 2021 financial results for its first quarter ended August 31, 2020.
"Our results this quarter continue to demonstrate NIKE's full competitive advantage, as we strengthen our position in the midst of disruption," said John Donahoe, President and CEO, NIKE, Inc. "In this dynamic environment, no one can match our pace of launching innovative product and our Brand's deep connection to consumers. These strengths, coupled with our digital acceleration, are unlocking NIKE's long-term market potential."**
Our first quarter revenue performance was impacted by strong NIKE Brand digital growth of 82 percent, offset by lower revenue in our wholesale business and NIKE-owned stores. Nearly all of the NIKE-owned physical doors were open during the quarter across North America, EMEA and Greater China with approximately 90 percent of doors open in APLA. However, despite a majority of stores open in the quarter, we continue to experience year-over-year declines in physical retail traffic across the marketplace due to COVID-19 impacts and safety related measures, offset partially by higher conversion rates. EMEA returned to growth of 5 percent on a reported basis, led by triple-digit growth in digital. Greater China revenue increased by 6 percent on a reported basis and 8 percent on a currency-neutral basis, led by digital and NIKE Factory Stores.
"NIKE is recovering faster based on accelerating brand momentum and digital growth, as well as our relentless focus on normalizing marketplace supply and demand," said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. "We continue to drive investment in capabilities that will fuel our consumer-led digital transformation, catalyzing long-term growth and profitability for NIKE."**
First Quarter Income Statement Review
August 31, 2020 Balance Sheet Review
Shareholder Returns
NIKE has a strong track record of investing to fuel growth and consistently increasing returns to shareholders including 18 consecutive years of increasing dividend payouts. In the first quarter, the Company paid dividends of $384 million to shareholders, up 11 percent from the prior year.
During the fourth quarter 2020, NIKE, Inc. temporarily suspended share repurchase activity in March to maximize liquidity during the COVID-19 pandemic. Prior to the temporary suspension of the share repurchase program, a total of 45.2 million shares had been repurchased for approximately $4.0 billion, resulting in approximately $11.0 billion in remaining capacity under the 2018 share repurchase program.
Conference Call
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 22, 2020, 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 6, 2020.
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. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic 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 paragraphs contain 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. |
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CONSOLIDATED STATEMENTS OF INCOME |
||||||||||
(Unaudited) |
||||||||||
|
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|
|
|
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|
THREE MONTHS ENDED |
% |
||||||||
(In millions, except per share data) |
8/31/2020 |
8/31/2019 |
Change |
|||||||
Revenues |
$ |
10,594 |
|
|
$ |
10,660 |
|
|
-1 |
% |
Cost of sales |
5,853 |
|
|
5,789 |
|
|
1 |
% |
||
Gross profit |
4,741 |
|
|
4,871 |
|
|
-3 |
% |
||
Gross margin |
44.8 |
|
% |
45.7 |
|
% |
|
|||
|
|
|
|
|||||||
Demand creation expense |
677 |
|
|
1,018 |
|
|
-33 |
% |
||
Operating overhead expense |
2,298 |
|
|
2,310 |
|
|
-1 |
% |
||
Total selling and administrative expense |
2,975 |
|
|
3,328 |
|
|
-11 |
% |
||
% of revenues |
28.1 |
|
% |
31.2 |
|
% |
|
|||
|
|
|
|
|||||||
Interest expense (income), net |
65 |
|
|
15 |
|
|
? |
|
||
Other (income) expense, net |
(14 |
) |
|
(33 |
) |
|
? |
|
||
Income before income taxes |
1,715 |
|
|
1,561 |
|
|
10 |
% |
||
Income tax expense |
197 |
|
|
194 |
|
|
2 |
% |
||
Effective tax rate |
11.5 |
|
% |
12.4 |
|
% |
|
|||
|
|
|
|
|||||||
NET INCOME |
$ |
1,518 |
|
|
$ |
1,367 |
|
|
11 |
% |
|
|
|
|
|||||||
Earnings per common share: |
|
|
|
|||||||
Basic |
$ |
0.97 |
|
|
$ |
0.87 |
|
|
11 |
% |
Diluted |
$ |
0.95 |
|
|
$ |
0.86 |
|
|
10 |
% |
|
|
|
|
|||||||
Weighted average common shares outstanding: |
|
|
|
|||||||
Basic |
1,561.8 |
|
|
1,562.4 |
|
|
|
|||
Diluted |
1,593.3 |
|
|
1,597.5 |
|
|
|
|||
|
|
|
|
|||||||
Dividends declared per common share |
$ |
0.245 |
|
|
$ |
0.22 |
|
|
|
NIKE, Inc. |
||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|||||
|
|
|
|
|||||
|
August 31, |
August 31, |
% Change |
|||||
(Dollars in millions) |
2020 |
2019 |
||||||
ASSETS |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash and equivalents |
$ |
8,148 |
|
$ |
3,446 |
|
136 |
% |
Short-term investments |
1,332 |
|
198 |
|
573 |
% |
||
Accounts receivable, net |
3,813 |
|
4,656 |
|
-18 |
% |
||
Inventories |
6,705 |
|
5,835 |
|
15 |
% |
||
Prepaid expenses and other current assets |
1,939 |
|
2,093 |
|
-7 |
% |
||
Total current assets |
21,937 |
|
16,228 |
|
35 |
% |
||
Property, plant and equipment, net |
4,969 |
|
4,615 |
|
8 |
% |
||
Operating lease right-of-use assets, net |
3,158 |
|
2,832 |
|
12 |
% |
||
Identifiable intangible assets, net |
272 |
|
279 |
|
-3 |
% |
||
Goodwill |
223 |
|
224 |
|
0 |
% |
||
Deferred income taxes and other assets |
2,699 |
|
2,071 |
|
30 |
% |
||
TOTAL ASSETS |
$ |
33,258 |
|
$ |
26,249 |
|
27 |
% |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Current portion of long-term debt |
$ |
1 |
|
$ |
6 |
|
-83 |
% |
Notes payable |
137 |
|
250 |
|
-45 |
% |
||
Accounts payable |
1,983 |
|
2,716 |
|
-27 |
% |
||
Current portion of operating lease liabilities |
459 |
|
427 |
|
7 |
% |
||
Accrued liabilities |
5,742 |
|
4,455 |
|
29 |
% |
||
Income taxes payable |
297 |
|
216 |
|
38 |
% |
||
Total current liabilities |
8,619 |
|
8,070 |
|
7 |
% |
||
Long-term debt |
9,408 |
|
3,463 |
|
172 |
% |
||
Operating lease liabilities |
2,961 |
|
2,675 |
|
11 |
% |
||
Deferred income taxes and other liabilities |
3,046 |
|
2,841 |
|
7 |
% |
||
Redeemable preferred stock |
? |
|
? |
|
? |
|
||
Shareholders' equity |
9,224 |
|
9,200 |
|
0 |
% |
||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
33,258 |
|
$ |
26,249 |
|
27 |
% |
NIKE, Inc. |
||||||||
DIVISIONAL REVENUES |
||||||||
(Unaudited) |
||||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
|
|
|
% Change
|
||||
|
THREE MONTHS ENDED |
% |
||||||
(Dollars in millions) |
8/31/2020 |
8/31/2019 |
Change |
|||||
North America |
|
|
|
|
||||
Footwear |
$ |
2,957 |
$ |
2,669 |
11 |
% |
11 |
% |
Apparel |
1,125 |
1,431 |
-21 |
% |
-21 |
% |
||
Equipment |
143 |
193 |
-26 |
% |
-26 |
% |
||
Total |
4,225 |
4,293 |
-2 |
% |
-1 |
% |
||
Europe, Middle East & Africa |
|
|
|
|
||||
Footwear |
1,802 |
1,758 |
3 |
% |
2 |
% |
||
Apparel |
971 |
869 |
12 |
% |
11 |
% |
||
Equipment |
137 |
146 |
-6 |
% |
-6 |
% |
||
Total |
2,910 |
2,773 |
5 |
% |
5 |
% |
||
Greater China |
|
|
|
|
||||
Footwear |
1,251 |
1,164 |
7 |
% |
10 |
% |
||
Apparel |
478 |
465 |
3 |
% |
5 |
% |
||
Equipment |
51 |
50 |
2 |
% |
3 |
% |
||
Total |
1,780 |
1,679 |
6 |
% |
8 |
% |
||
Asia Pacific & Latin America |
|
|
|
|
||||
Footwear |
758 |
930 |
-18 |
% |
-12 |
% |
||
Apparel |
301 |
356 |
-15 |
% |
-10 |
% |
||
Equipment |
40 |
59 |
-32 |
% |
-28 |
% |
||
Total |
1,099 |
1,345 |
-18 |
% |
-12 |
% |
||
Global Brand Divisions2 |
4 |
6 |
-33 |
% |
-31 |
% |
||
TOTAL NIKE BRAND |
10,018 |
10,096 |
-1 |
% |
0 |
% |
||
Converse |
563 |
555 |
1 |
% |
2 |
% |
||
Corporate3 |
13 |
9 |
? |
|
? |
|
||
TOTAL NIKE, INC. REVENUES |
$ |
10,594 |
$ |
10,660 |
-1 |
% |
0 |
% |
|
|
|
|
|
||||
TOTAL NIKE BRAND |
|
|
|
|
||||
Footwear |
$ |
6,768 |
$ |
6,521 |
4 |
% |
5 |
% |
Apparel |
2,875 |
3,121 |
-8 |
% |
-7 |
% |
||
Equipment |
371 |
448 |
-17 |
% |
-16 |
% |
||
Global Brand Divisions2 |
4 |
6 |
-33 |
% |
-31 |
% |
||
TOTAL NIKE BRAND REVENUES |
$ |
10,018 |
$ |
10,096 |
-1 |
% |
0 |
% |
1 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. |
||||||||
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 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. |
||||||||||
EARNINGS BEFORE INTEREST AND TAXES1 |
||||||||||
(Unaudited) |
||||||||||
|
|
|
||||||||
|
|
|
||||||||
|
THREE MONTHS ENDED |
% |
||||||||
(Dollars in millions) |
8/31/2020 |
8/31/2019 |
Change |
|||||||
North America |
$ |
1,302 |
|
|
$ |
1,100 |
|
|
18 |
% |
Europe, Middle East & Africa |
692 |
|
|
609 |
|
|
14 |
% |
||
Greater China |
688 |
|
|
669 |
|
|
3 |
% |
||
Asia Pacific & Latin America |
280 |
|
|
341 |
|
|
-18 |
% |
||
Global Brand Divisions2 |
(853 |
) |
|
(857 |
) |
|
0 |
% |
||
TOTAL NIKE BRAND1 |
2,109 |
|
|
1,862 |
|
|
13 |
% |
||
Converse |
168 |
|
|
138 |
|
|
22 |
% |
||
Corporate3 |
(497 |
) |
|
(424 |
) |
|
-17 |
% |
||
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1 |
1,780 |
|
|
1,576 |
|
|
13 |
% |
||
Interest expense (income), net |
65 |
|
|
15 |
|
|
? |
|
||
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES |
$ |
1,715 |
|
|
$ |
1,561 |
|
|
10 |
% |
1 The Company evaluates the 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. Total NIKE Brand EBIT and Total NIKE, Inc. EBIT are considered non-GAAP financial measures and are being provided as management believes this additional information should be considered when assessing the Company's underlying business performance and trends. References to EBIT should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies. |
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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 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. For the three months ended August 31, 2020, Corporate included non-recurring employee termination and related costs associated with the previously announced leadership and operating model changes. |
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