01—Abstract
Summary
Summary of the 10-K filed July 30, 2004. Cited figures are marked; the original filing is the authoritative source.
NIKE, Inc. reported strong financial performance for the fiscal year ended May 31, 2004, with revenues growing 15% year-over-year to $12.25 billiona.
This growth was driven by a combination of currency tailwinds, particularly a stronger euro, and robust sales in international regions, notably Asia Pacific and EMEA. The company also saw significant improvement in its gross margin, up 190 basis points to 42.9%b, attributed to favorable hedge rates, improved in-line pricing, and better margins on closeout sales. The acquisition of Converse in the second quarter of fiscal 2004 contributed to revenue growth and expanded NIKE's brand portfolio.
The company continued to invest in demand creation and operating overhead to support global growth initiatives and supply chain upgrades. Management reiterated its commitment to long-term financial goals of high single-digit revenue growth and mid-teens earnings per share growth, supported by strong cash flow generation and ongoing share repurchases.
02—Key points
Key Highlights
- Consolidated revenues increased by 15% to $12.25 billion, with international markets and the acquisition of Converse being key drivers.
- Gross margin improved significantly by 190 basis points to 42.9%, benefiting from favorable currency hedges and improved product costs.
- The company successfully completed its $1.0 billion share repurchase program and authorized a new $1.5 billion program.
- Operating income before the cumulative effect of accounting change grew by 28% year-over-year.
- The EMEA and Asia Pacific regions showed strong revenue growth, up 18% and 20% respectively, with currency fluctuations positively impacting reported results.
- NIKE continued to invest in its supply chain systems upgrade, with approximately 80% of businesses having completed implementation by year-end.
- Diluted earnings per share (before accounting change) grew by 27% to $3.51.
03—Questions
Frequently Asked Questions
What was NIKE's revenue growth in fiscal year 2004, and what were the main drivers?
NIKE reported a 15% increase in consolidated revenues for fiscal year 2004, reaching $12.25 billion. Key drivers included a favorable impact from currency exchange rates (approximately 7 percentage points), strong performance in international regions (contributing 3 percentage points), and the acquisition of Converse which added 2 percentage points. Growth in the U.S. region and other businesses also contributed.
How did NIKE's gross margin perform in fiscal year 2004, and what contributed to the improvement?
NIKE's consolidated gross margin percentage improved by 190 basis points to 42.9% in fiscal year 2004 compared to the prior year. This improvement was primarily due to favorable changes in currency hedge rates (70 basis points), higher in-line pricing margins from manufacturing efficiencies and lower material costs (70 basis points), improved profitability on wholesale closeout sales (10 basis points), and better gross margins in NIKE-owned retail stores (30 basis points).
What significant acquisitions or divestitures occurred during fiscal year 2004?
The most significant event was the acquisition of Converse Inc. on September 4, 2003, which was accounted for using the purchase method and included in the consolidated financial statements from that date. This acquisition expanded NIKE's brand portfolio and contributed to revenue growth.
What is NIKE's strategy regarding its supply chain, and what progress has been made?
NIKE is undertaking a multi-year initiative to upgrade its worldwide supply chain by implementing new systems and processes. This initiative aims to improve responsiveness to market conditions, enhance margins through reduced inventory and distribution costs, and boost cash flow. By the end of fiscal year 2004, approximately 80% of NIKE's businesses had completed the implementation of these new systems.
04—Continue