01—Abstract
Summary
Summary of the 10-K filed July 25, 2018. Cited figures are marked; the original filing is the authoritative source.
NIKE, Inc. reported solid revenue growth in fiscal year 2018, reaching $36.4 billiona, a 6% increase year-over-year.
This growth was primarily driven by a strong performance in the NIKE Brand, which saw a 7%b increase in revenue, and notable growth across international geographies and the direct-to-consumer (NIKE Direct) channel. The Consumer Direct Offense strategy, focused on digital acceleration and closer consumer connections, continued to show promise, with NIKE Direct sales increasing by 12% on a currency-neutral basis, representing 30% of total NIKE Brand revenue.
However, the company experienced a significant drop in net income, down 54% to $1.93 billionc, largely impacted by a substantial income tax expense related to the U.S. Tax Cuts and Jobs Act of 2017, which included a one-time transition tax on repatriated foreign earnings. Despite this, the company continued its commitment to shareholder returns through its share repurchase program, buying back approximately $4.25 billion of stock in fiscal year 2018.
02—Key points
Key Highlights
- NIKE, Inc. reported total revenues of $36.4 billion for fiscal year 2018, a 6% increase from the prior year, driven by a strong NIKE Brand performance and international growth.
- The company's NIKE Direct channel continues to expand, with revenues up 12% currency-neutral, now comprising 30% of total NIKE Brand revenue.
- Geographically, Greater China, EMEA, and Asia Pacific & Latin America regions showed robust revenue growth (21%, 16%, and 9% respectively), while North America saw a slight decrease of 2%.
- Net income saw a significant decline of 54% to $1.93 billion, primarily due to a substantial income tax expense related to the Tax Cuts and Jobs Act of 2017, including a one-time transition tax.
- Gross margin decreased by 80 basis points to 43.8%, mainly impacted by unfavorable foreign currency exchange rates.
- Selling and administrative expenses increased by 9%, reflecting investments in digital capabilities and consumer experiences as part of the Consumer Direct Offense strategy.
- NIKE continued its capital allocation strategy by repurchasing approximately $4.25 billion of its common stock in fiscal year 2018, as part of an ongoing $12 billion share repurchase program.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed July 25, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $36.40B$34.35B | +6.0% |
| Cost of Revenue | $20.44B$19.04B | +7.4% |
| Gross Profit | $15.96B$15.31B | +4.2% |
| SG&A Expenses | $11.51B$10.56B | +9.0% |
| Net Income | $1.93B$4.24B | −54.4% |
| EPS (Basic) | $1.19$2.56 | −53.5% |
| EPS (Diluted) | $1.17$2.51 | −53.4% |
| Shares Outstanding (Basic) | 1.62B1.66B | −2.1% |
| Shares Outstanding (Diluted) | 1.66B1.69B | −1.9% |
05—Questions
Frequently Asked Questions
What was NIKE's overall revenue growth in fiscal year 2018?
NIKE, Inc. reported total revenues of $36.4 billion for fiscal year 2018, representing a 6% increase compared to fiscal year 2017. The NIKE Brand itself saw a 7% revenue increase.
What drove the significant decrease in net income?
The primary driver for the 54% decrease in net income was a substantial income tax expense, largely due to the one-time transition tax and other provisions related to the U.S. Tax Cuts and Jobs Act of 2017 enacted in December 2017. This impact was approximately $1.875 billion for the transition tax and $158 million for deferred tax asset/liability remeasurement.
How did the company's direct-to-consumer (NIKE Direct) business perform?
NIKE Direct operations performed strongly, with revenues increasing 12% on a currency-neutral basis. This channel now represents 30% of total NIKE Brand revenues, up from 28% in the prior year, highlighting the success of the company's Consumer Direct Offense strategy.
What was the impact of foreign currency exchange rates on the company's results?
Unfavorable changes in net foreign currency exchange rates negatively impacted gross margin by approximately 90 basis points in fiscal year 2018. On a currency-neutral basis, NIKE, Inc. revenues grew 4%, indicating that reported revenue growth would have been higher without currency headwinds.
06—Continue