10-QPeriod: Q2 FY2002

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2001

Filed January 14, 2002For Securities:NKE

Summary

NIKE, Inc. reported a solid increase in net income for the second quarter of fiscal year 2002, up 8.3% to $129.3 million, or $0.48 per diluted share, compared to the same period last year. This growth was primarily driven by a 6.3% increase in consolidated revenues to $2,336.8 million, fueled by strong performance in international markets, particularly Europe, the Middle East, and Africa (EMEA), and the Asia Pacific region. While U.S. revenues saw modest growth, there was a notable decline in U.S. footwear sales, which is an area investors will want to monitor. Despite a decrease in gross margin and higher other expenses, the company managed to improve profitability through effective cost management, including lower selling and administrative expenses as a percentage of revenue and reduced interest expense. A lower effective tax rate also contributed to the bottom line. The company continues to expect earnings growth for the full fiscal year, even amidst broader economic uncertainties post-September 11th. The balance sheet shows a healthy increase in cash and equivalents, coupled with strategic management of debt and inventory.

Key Highlights

  • 1Net income increased by 8.3% to $129.3 million for the second quarter of FY2002.
  • 2Diluted earnings per share rose by 9.1% to $0.48, outpacing net income growth due to share repurchases.
  • 3Consolidated revenues grew by 6.3% to $2,336.8 million, driven by strong international performance (+11.6% reported, +14.6% in constant dollars).
  • 4EMEA region showed robust growth with a 13.8% reported revenue increase (10.6% constant dollars), led by footwear.
  • 5Asia Pacific region also experienced strong growth, up 11.2% reported (22.5% constant dollars), indicating increasing demand.
  • 6U.S. revenues grew by 2.5%, but U.S. NIKE brand footwear sales declined by 2.2%, a point of attention for investors.
  • 7Gross margin decreased from 39.6% to 38.3%, while selling and administrative expenses as a percentage of revenue were lower.

Frequently Asked Questions

The primary driver of revenue growth in the second quarter was strong performance in NIKE's international regions, particularly Europe, the Middle East, and Africa (EMEA), and the Asia Pacific region. These regions collectively saw reported revenue increases of 11.6% and 14.6% in constant dollars, driven by increased demand and favorable pricing and product mix in certain categories.

The U.S. market showed modest growth with revenues up 2.5%. However, this was somewhat offset by a 2.2% decrease in U.S. NIKE brand footwear sales, although this represented an improvement from the previous quarter. Growth in U.S. apparel and equipment businesses helped to bolster overall U.S. revenue.

Despite ongoing economic uncertainties, particularly following the events of September 11, 2001, NIKE continues to expect earnings growth for the full fiscal year. The company is actively managing inventory and supply chain systems to navigate these conditions.

Foreign currency fluctuations had a mixed impact. On a consolidated basis, the reported revenue increase was 6.3%, but in constant dollars, the increase would have been 7.6%. International revenues benefited from currency strength relative to the U.S. dollar in constant dollar reporting, while currency weakness in Asia Pacific amplified reported revenue growth there.