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NIKE, Inc. Reports Fiscal 2019 First Quarter Results

September 25, 2018 4:15 PM

BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE: NKE) today reported fiscal 2019 financial results for its first quarter ended August 31, 2018. For the quarter, double-digit revenue growth was driven by the continued success of the Consumer Direct Offense, which fueled growth across all geographies as well as wholesale and NIKE Direct, led by digital.

“NIKE’s Consumer Direct Offense, combined with our deep line up of innovation, is driving strong momentum and balanced growth across our entire business,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our expanded digital capabilities are accelerating our complete portfolio and creating value across all dimensions as we connect with and serve consumers.”*

Diluted earnings per share for the quarter were $0.67, an increase of 18 percent driven by strong revenue growth, gross margin expansion, selling and administrative expense leverage, and a lower average share count, partially offset by a higher effective tax rate.

“We are delivering stronger global growth and profitability than we anticipated entering this fiscal year,” said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. “While foreign exchange volatility has increased, our underlying currency-neutral momentum continues to build as we transform how NIKE operates, drives growth and creates value for our shareholders.”*

First Quarter Income Statement Review

August 31, 2018 Balance Sheet Review

Share Repurchases

During the first quarter, NIKE, Inc. repurchased a total of 17.8 million shares for approximately $1.4 billion as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. As of August 31, 2018, a total of 167.2 million shares had been repurchased under this program for approximately $10.1 billion. In June 2018, the Board of Directors authorized a new four-year $15 billion share repurchase program that will commence upon the completion of the current program.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 25, 2018, to review fiscal first 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 For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, October 2, 2018.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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.
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** See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure.
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(Tables Follow)

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NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
� � � � � �
THREE MONTHS ENDED %
(Dollars in millions, except per share data) � � 8/31/2018 � � � 8/31/2017 � � � Change
Revenues $ 9,948 $ 9,070 10 %
Cost of sales � � � 5,551 � � � � 5,108 � � � 9 %
Gross profit 4,397 3,962 11 %
Gross margin 44.2 % 43.7 %
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Demand creation expense 964 855 13 %
Operating overhead expense � � � 2,099 � � � � 2,001 � � � 5 %
Total selling and administrative expense 3,063 2,856 7 %
% of revenues 30.8 % 31.5 %
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Interest expense (income), net 11 16 —
Other expense (income), net � � � 53 � � � � 18 � � � — �
Income before income taxes 1,270 1,072 18 %
Income tax expense � � � 178 � � � � 122 � � � 46 %
Effective tax rate 14.0 % 11.4 %
� � � � � � � � � �
NET INCOME � � $ 1,092 � � � $ 950 � � � 15 %
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Earnings per common share:
Basic $ 0.69 $ 0.58 19 %
Diluted $ 0.67 $ 0.57 18 %
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Weighted average common shares outstanding:
Basic 1,594.0 1,639.1
Diluted 1,634.4 1,676.9
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Dividends declared per common share � � $ 0.20 � � � $ 0.18 � � � �
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NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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� � August 31, � � August 31, � �

�

(Dollars in millions) � � 2018 � � 2017 � �

% Change

ASSETS
Current assets:
Cash and equivalents $ 3,282 $ 3,413 -4 %
Short-term investments 987 2,106 -53 %
Accounts receivable, net 4,330 3,871 12 %
Inventories 5,227 5,211 0 %
Prepaid expenses and other current assets � � � 1,675 � � � 1,591 � � 5 %
Total current assets 15,501 16,192 -4 %
Property, plant and equipment, net 4,487 4,086 10 %
Identifiable intangible assets, net 284 283 0 %
Goodwill 154 139 11 %
Deferred income taxes and other assets � � � 2,057 � � � 2,947 � � -30 %
TOTAL ASSETS � � $ 22,483 � � $ 23,647 � � -5 %
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6 $ 7 -14 %
Notes payable 13 335 -96 %
Accounts payable 2,333 2,116 10 %
Accrued liabilities 4,174 3,501 19 %
Income taxes payable � � � 182 � � � 97 � � 88 %
Total current liabilities 6,708 6,056 11 %
Long-term debt 3,467 3,472 0 %
Deferred income taxes and other liabilities 3,316 2,126 56 %
Redeemable preferred stock — — —
Shareholders' equity � � � 8,992 � � � 11,993 � � -25 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY � � $ 22,483 � � $ 23,647 � � -5 %
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NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
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� � � � � � � �

% Change

Excluding

THREE MONTHS ENDED

%

Currency

(Dollars in millions) � � 8/31/2018 � � 8/31/2017 � �

Change

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Changes1

North America
Footwear $ 2,555 $ 2,434 5 % 5 %
Apparel 1,407 1,299 8 % 8 %
Equipment � � � 183 � � � 191 � � -4 % � �

-4

%

Total 4,145 3,924 6 % 6 %
Europe, Middle East & Africa
Footwear 1,642 1,471 12 % 10 %
Apparel 830 743 12 % 10 %
Equipment � � � 135 � � � 130 � � 4 % � � 3 %
Total 2,607 2,344 11 % 9 %
Greater China
Footwear 958 761 26 % 22 %
Apparel 380 309 23 % 19 %
Equipment � � � 41 � � � 38 � � 8 % � � 2 %
Total 1,379 1,108 24 % 20 %
Asia Pacific & Latin America
Footwear 881 827 7 % 14 %
Apparel 332 301 10 % 18 %
Equipment � � � 57 � � � 61 � � -7 % � � -1 %
Total 1,270 1,189 7 % 14 %
Global Brand Divisions2 � � � 16 � � � 20 � � -20 % � � -27 %
TOTAL NIKE BRAND � � � 9,417 � � � 8,585 � � 10 % � � 10 %
Converse 527 483 9 % 7 %
Corporate3 � � � 4 � � � 2 � � — � � � — �
TOTAL NIKE, INC. REVENUES � � $ 9,948 � � $ 9,070 � � 10 % � � 9 %
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TOTAL NIKE BRAND
Footwear $ 6,036 $ 5,493 10 % 10 %
Apparel 2,949 2,652 11 % 11 %
Equipment 416 420 -1 % -1 %
Global Brand Divisions2 � � � 16 � � � 20 � � -20 % � � -27 %
TOTAL NIKE BRAND REVENUES � � $ 9,417 � � $ 8,585 � � 10 % � � 10 %

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 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 the Company's central foreign exchange risk management program.

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NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES1
(Unaudited)
� � � � � �
THREE MONTHS ENDED %
(Dollars in millions) � � 8/31/2018 � � 8/31/2017 � � Change
North America $ 1,077 $ 1,002 7 %
Europe, Middle East & Africa 501 451 11 %
Greater China 502 394 27 %
Asia Pacific & Latin America 323 260 24 %
Global Brand Divisions2 � � � (818 ) � � � (675 ) � � -21 %
TOTAL NIKE BRAND � � � 1,585 � � � � 1,432 � � � 11 %
Converse 98 89 10 %
Corporate3 � � � (402 ) � � � (433 ) � � 7 %
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES � � � 1,281 � � � � 1,088 � � � 18 %
Interest expense (income), net � � � 11 � � � � 16 � � � — �
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES � � $ 1,270 � � � $ 1,072 � � � 18 %
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 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 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:

Mark Rhodes, 503-532-8877

Source: NIKE, Inc.

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