What is the primary driver of NIKE's revenue and profit growth in this period?

The primary drivers of revenue and profit growth are strong performance across international regions, particularly EMEA and Asia Pacific, benefiting from favorable foreign currency exchange rates and effective hedging strategies. Additionally, increased consumer demand for performance products in the U.S. and strategic investments in demand creation and retail development have contributed significantly to the positive results.

How is NIKE managing its inventory and gross margins, especially considering potential closeout sales?

NIKE experienced an increase in gross margin percentage, partly due to favorable currency impacts. However, the company noted that some international regions, particularly EMEA, saw reduced gross margin improvement due to increased levels of closeout sales and lower pricing margins on these items, stemming from higher footwear and apparel closeout inventories. They are actively managing product value strategies and discounts to balance growth and profitability.

What is NIKE's outlook regarding future orders and potential challenges?

NIKE's futures and advance orders for the upcoming delivery period (March-July 2005) show a healthy increase of 9.6%. However, the company cautions that these orders are not always indicative of future revenue growth due to shifts in order mix (futures vs. at-once sales), currency fluctuations, and order cancellations. Additionally, the declining revenue from licensed apparel in the U.S. due to contract expirations is noted as a factor that may temper overall revenue growth.

What are the key accounting changes or standards NIKE is preparing for?

NIKE is currently evaluating the impact of two significant accounting pronouncements. The first is SFAS No. 151, 'Inventory Costs,' effective June 1, 2006, which clarifies the treatment of abnormal inventory costs. The second is SFAS No. 123R, 'Share-Based Payment,' effective after June 15, 2005, which will require the company to record compensation expense for stock options using a fair value method. The exact impact of adopting FAS 123R is still being determined.

NKE 10-Q Filed Apr 6, 2005

Summary

NIKE, Inc. reported strong financial results for the third quarter and the first nine months of fiscal year 2005, demonstrating significant revenue and net income growth. Revenue increased by 14% year-over-year for both periods, reaching $3.3 billion in the third quarter and $10.0 billion year-to-date. This growth was driven by solid performance across international regions, particularly EMEA and Asia Pacific, with contributions from the U.S. as well. The company also saw a substantial increase in net income, up 36% to $273.4 million for the third quarter and 35% to $862.1 million year-to-date. Diluted earnings per share also saw a corresponding increase, reflecting the strong operational performance. Gross margin percentage showed significant improvement, rising 200 basis points to 44.1% in the third quarter, largely due to favorable foreign currency impacts and improved hedging strategies, particularly for the Euro. While international regions led the margin expansion, the U.S. also contributed positively. Selling and administrative expenses increased, driven by investments in demand creation, sports marketing, and retail development, but were outpaced by revenue growth, contributing to the overall profitability increase. The company also provided an update on its share repurchase program and highlighted its solid liquidity position, with ample cash generated from operations and access to a revolving credit facility.

Key Highlights

1Revenue grew 14% to $3.3 billion in Q3 FY05 and 14% to $10.0 billion year-to-date, driven by strong international and U.S. performance.
2Net income increased significantly by 36% to $273.4 million in Q3 FY05 and 35% to $862.1 million year-to-date.
3Diluted Earnings Per Share (EPS) rose 36% to $1.01 in Q3 FY05 and 34% to $3.18 year-to-date.
4Consolidated gross margin percentage improved to 44.1% in Q3 FY05, up 200 basis points, primarily due to favorable foreign currency impacts and hedging.
5Operating cash flow for the first nine months was $1.08 billion, indicating robust cash generation.
6The company repurchased approximately 2.3 million shares of Class B common stock for $199.8 million in the third quarter, continuing its share repurchase program.
7Futures and advance orders for March-July 2005 increased by 9.6% globally, suggesting continued demand, though FX impacts and order mix need to be considered.

NIKE, Inc. Quarterly Report for Q3 Ended Apr 6, 2005

Summary

Key Highlights

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