10-KPeriod: FY2018

NIKE, Inc. Annual Report, Year Ended May 31, 2018

Filed July 25, 2018For Securities:NKE

Summary

NIKE, Inc. reported solid revenue growth in fiscal year 2018, reaching $36.4 billion, a 6% increase year-over-year. This growth was primarily driven by a strong performance in the NIKE Brand, which saw a 7% 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 billion, 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.

Financial Highlights

49 data points
Beta

Revenue

$36.40B

43.8% Gross Margin

Net Income

$1.93B

5.3% Net Margin

EPS (Diluted)

$1.17

Total Assets

$22.54B

Cash & Equivalents

$4.25B

Free Cash Flow

$3.93B

Financial Statements
Beta
Revenue$36.40B
Cost of Revenue$20.44B
Gross Profit$15.96B
SG&A Expenses$11.51B
Net Income$1.93B
EPS (Basic)$1.19
EPS (Diluted)$1.17
Shares Outstanding (Basic)1.62B
Shares Outstanding (Diluted)1.66B

Key Highlights

  • 1NIKE, 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.
  • 2The company's NIKE Direct channel continues to expand, with revenues up 12% currency-neutral, now comprising 30% of total NIKE Brand revenue.
  • 3Geographically, 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%.
  • 4Net 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.
  • 5Gross margin decreased by 80 basis points to 43.8%, mainly impacted by unfavorable foreign currency exchange rates.
  • 6Selling and administrative expenses increased by 9%, reflecting investments in digital capabilities and consumer experiences as part of the Consumer Direct Offense strategy.
  • 7NIKE 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.

Frequently Asked Questions

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.

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.

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.

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.