NIKE, Inc. (NYSE:NKE) today reported fiscal 2023 financial
results for its first quarter ended August 31, 2022.
- First quarter reported revenues were $12.7 billion, up 4
percent compared to the prior year and up 10 percent on a
currency-neutral basis*
- NIKE Direct sales were $5.1 billion, up 8 percent on a reported
basis and up 14 percent on a currency-neutral basis
- NIKE Brand Digital sales increased 16 percent on a reported
basis, or 23 percent on a currency-neutral basis, led by 46 percent
growth in EMEA
- Gross margin decreased 220 basis points to 44.3 percent
- Diluted earnings per share for the quarter was $0.93, down 20
percent
"Our strong start to FY23 highlights the depth and breadth of
NIKE’s global portfolio, as we continue to manage through
volatility,” said John Donahoe, President and CEO, NIKE, Inc. “Our
competitive advantages, including the strength of our brand, deep
consumer connections and pipeline of innovative product, continue
to prove that our strategy is working. We expect our unrelenting
focus on better serving the consumer to continue to fuel growth and
create value like only NIKE can."**
First Quarter revenues increased 10 percent on a
currency-neutral basis, led by NIKE Direct growth of 14 percent.
NIKE Brand Digital business fueled growth, increasing by 23
percent, driven by double-digit growth in EMEA, North America and
APLA, partially offset by declines in Greater China. Wholesale
revenues increased 1 percent on a reported basis and were up 8
percent on a currency-neutral basis, with growth due to improved
levels of available supply of inventory for partners.
“NIKE's first quarter results set the foundation for another
year of strong growth,” said Matthew Friend, Executive Vice
President and Chief Financial Officer, NIKE, Inc. “Our focus
continues to be the consumer, as we take action to navigate
near-term dynamics while expanding long-term structural benefits
through our Consumer Direct Acceleration strategy.”**
First Quarter Income Statement Review
- Revenues for NIKE, Inc. increased 4 percent to $12.7
billion compared to the prior year and were up 10 percent on a
currency-neutral basis.
- Revenues for the NIKE Brand were $12.0 billion, up 4 percent on
a reported basis and up 10 percent on a currency-neutral basis, led
by double-digit currency-neutral growth in North America, EMEA and
APLA, partially offset by declines in Greater China.
- Revenues for Converse were $643 million, up 2 percent on a
reported basis and up 8 percent on a currency-neutral basis, led by
double-digit growth in North America and Europe, partially offset
by declines in Asia.
- Gross margin decreased 220 basis points to 44.3 percent,
primarily driven by elevated freight and logistics costs, lower
margins in our NIKE Direct business driven by higher markdowns, and
unfavorable changes in net foreign currency exchange rates,
including hedges, partially offset by strategic pricing actions.
The overall decrease in margins was primarily driven by North
America, which took measures to liquidate excess inventory through
NIKE Direct markdowns and wholesale marketplace actions.
- Selling and administrative expense increased 10 percent
to $3.9 billion.
- Demand creation expense was $943 million, up 3 percent,
primarily due to normalization of spend against sports marketing
and brand campaign investments.
- Operating overhead expense increased 12 percent to $3.0
billion, primarily due to wage-related expenses, strategic
technology investments and increased NIKE Direct costs.
- The effective tax rate for the quarter was 19.7 percent
compared to 11.0 percent for the same period last year, primarily
due to the decreased benefits from stock-based compensation.
- Net income was $1.5 billion, down 22 percent, and
Diluted earnings per share was $0.93, decreasing 20
percent.
August 31, 2022 Balance Sheet Review
- Inventories for NIKE, Inc. were $9.7 billion, up 44
percent compared to the prior year period, driven by elevated
in-transit inventories from ongoing supply chain volatility,
partially offset by strong consumer demand during the quarter.
- Cash and equivalents and short-term investments were
$11.9 billion, down approximately $1.8 billion from last year, as
free cash flow was offset by share repurchases and cash
dividends.
Shareholder Returns
NIKE continues to have a strong track record of investing to
fuel growth and consistently increasing returns to shareholders,
including 20 consecutive years of increasing dividend payouts. In
the first quarter, NIKE returned approximately $1.5 billion to
shareholders, including:
- Dividends of $480 million, up 11 percent from the prior
year.
- Share repurchases of $1.0 billion, reflecting 9.0
million retired shares. There were purchases of $0.7 billion,
reflecting 6.5 million shares retired under the Company’s previous
four-year, $15 billion program approved in June 2018 and $0.3
billion, reflecting 2.5 million shares subsequently retired under
the Company’s current four-year, $18 billion program approved in
June 2022.
Under the $15 billion program, which was terminated in August
2022, a total of 83.8 million shares for $9.4 billion were
repurchased.
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on September 29, 2022, 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
approximately 9:00 p.m. PT, October 20, 2022.
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.
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
THREE MONTHS ENDED
%
(In millions, except per share data)
8/31/2022
8/31/2021
Change
Revenues
$
12,687
$
12,248
4
%
Cost of sales
7,072
6,552
8
%
Gross profit
5,615
5,696
-1
%
Gross margin
44.3
%
46.5
%
Demand creation expense
943
918
3
%
Operating overhead expense
2,977
2,654
12
%
Total selling and administrative
expense
3,920
3,572
10
%
% of revenues
30.9
%
29.2
%
Interest expense (income), net
13
57
—
Other (income) expense, net
(146
)
(39
)
—
Income before income taxes
1,828
2,106
-13
%
Income tax expense
360
232
55
%
Effective tax rate
19.7
%
11.0
%
NET INCOME
$
1,468
$
1,874
-22
%
Earnings per common share:
Basic
$
0.94
$
1.18
-20
%
Diluted
$
0.93
$
1.16
-20
%
Weighted average common shares
outstanding:
Basic
1,567.1
1,581.9
Diluted
1,585.8
1,619.6
Dividends declared per common share
$
0.305
$
0.275
NIKE, Inc.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
August 31,
August 31,
% Change
(Dollars in millions)
2022
2021
ASSETS
Current assets:
Cash and equivalents
$
7,226
$
10,720
-33
%
Short-term investments
4,650
2,975
56
%
Accounts receivable, net
4,960
4,341
14
%
Inventories
9,662
6,699
44
%
Prepaid expenses and other current
assets
2,379
1,655
44
%
Total current assets
28,877
26,390
9
%
Property, plant and equipment, net
4,778
4,869
-2
%
Operating lease right-of-use assets,
net
2,880
3,078
-6
%
Identifiable intangible assets, net
283
267
6
%
Goodwill
282
242
17
%
Deferred income taxes and other assets
3,988
3,071
30
%
TOTAL ASSETS
$
41,088
$
37,917
8
%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt
$
500
$
—
—
Notes payable
9
15
-40
%
Accounts payable
3,371
2,135
58
%
Current portion of operating lease
liabilities
424
462
-8
%
Accrued liabilities
6,277
5,296
19
%
Income taxes payable
338
361
-6
%
Total current liabilities
10,919
8,269
32
%
Long-term debt
8,922
9,415
-5
%
Operating lease liabilities
2,736
2,898
-6
%
Deferred income taxes and other
liabilities
2,689
2,992
-10
%
Redeemable preferred stock
—
—
—
Shareholders’ equity
15,822
14,343
10
%
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
41,088
$
37,917
8
%
NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
% Change Excluding
Currency Changes1
THREE MONTHS ENDED
%
(Dollars in millions)
8/31/2022
8/31/2021
Change
North America
Footwear
$
3,805
$
3,264
17
%
17
%
Apparel
1,494
1,430
4
%
5
%
Equipment
211
185
14
%
14
%
Total
5,510
4,879
13
%
13
%
Europe, Middle East &
Africa
Footwear
2,012
1,983
1
%
18
%
Apparel
1,153
1,159
-1
%
15
%
Equipment
168
165
2
%
18
%
Total
3,333
3,307
1
%
17
%
Greater China
Footwear
1,233
1,449
-15
%
-11
%
Apparel
374
476
-21
%
-18
%
Equipment
49
57
-14
%
-10
%
Total
1,656
1,982
-16
%
-13
%
Asia Pacific & Latin
America
Footwear
1,064
1,022
4
%
15
%
Apparel
413
385
7
%
19
%
Equipment
58
58
0
%
12
%
Total
1,535
1,465
5
%
16
%
Global Brand Divisions2
14
7
100
%
96
%
TOTAL NIKE BRAND
12,048
11,640
4
%
10
%
Converse
643
629
2
%
8
%
Corporate3
(4
)
(21
)
—
—
TOTAL NIKE, INC. REVENUES
$
12,687
$
12,248
4
%
10
%
TOTAL NIKE BRAND
Footwear
$
8,114
$
7,718
5
%
12
%
Apparel
3,434
3,450
0
%
7
%
Equipment
486
465
5
%
12
%
Global Brand Divisions2
14
7
100
%
96
%
TOTAL NIKE BRAND REVENUES
$
12,048
$
11,640
4
%
10
%
1 The percent change has been calculated
using actual exchange rates in use during the comparative prior
year period and is provided 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. Management uses this
non-GAAP financial measure when evaluating the Company's
performance, including when making financial and operating
decisions. Additionally, management believes this non-GAAP
financial measure provides investors with additional financial
information that should be considered when assessing the Company’s
underlying business performance and trends. References to this
measure 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.
2 Global Brand Divisions revenues include
NIKE Brand licensing and other miscellaneous revenues 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.
NIKE, Inc.
EARNINGS BEFORE INTEREST AND
TAXES1
(Unaudited)
THREE MONTHS ENDED
%
(Dollars in millions)
8/31/2022
8/31/2021
Change
North America
$
1,377
$
1,434
-4
%
Europe, Middle East & Africa
975
875
11
%
Greater China
541
701
-23
%
Asia Pacific & Latin America
500
481
4
%
Global Brand Divisions2
(1,187
)
(987
)
-20
%
TOTAL NIKE BRAND1
2,206
2,504
-12
%
Converse
209
204
2
%
Corporate3
(574
)
(545
)
-5
%
TOTAL NIKE, INC. EARNINGS BEFORE
INTEREST AND TAXES1
1,841
2,163
-15
%
EBIT margin1
14.5
%
17.7
%
Interest expense (income), net
13
57
—
TOTAL NIKE, INC. INCOME BEFORE INCOME
TAXES
$
1,828
$
2,106
-13
%
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. EBIT
margin is calculated as EBIT divided by total NIKE, Inc. Revenues.
Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin are
considered non-GAAP financial measures. Management uses these
non-GAAP financial measures when evaluating the Company's
performance, including when making financial and operating
decisions. Additionally, management believes these non-GAAP
financial measures provide investors with additional information
that should be considered when assessing the Company’s underlying
business performance and trends. References to EBIT and EBIT margin
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.
2 Global Brand Divisions primarily
represent demand creation and operating overhead expense, including
product creation and design expenses that are centrally managed for
the NIKE Brand, as well as costs associated with NIKE Direct global
digital operations and enterprise technology. Global Brand
Divisions revenues include NIKE Brand licensing and other
miscellaneous revenues 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220929005854/en/
Investor Contact: Paul Trussell
investor.relations@nike.com
Media Contact: KeJuan Wilkins
media.relations@nike.com
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