NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2009

Summary

NIKE, Inc. reported its first quarter fiscal year 2010 results, ending August 31, 2009. The company saw a revenue decline of 12% to $4.8 billion, primarily attributed to a challenging global consumer spending environment and comparisons to strong prior-year results boosted by the Beijing Olympics and European Football Championships. Despite the revenue dip, net income saw a slight increase to $513.0 million, and diluted earnings per share rose 1% to $1.04. This performance was aided by a significant decrease in selling and administrative expenses (down 17%) and a lower effective tax rate. Key operational highlights include a 100 basis point decline in gross margin percentage, largely due to increased discounts to manage inventory and unfavorable foreign exchange impacts. Selling and administrative expenses decreased significantly due to reduced demand creation spending (down 32%) and lower operating overhead, partly from prior restructuring. While North America and Emerging Markets showed some resilience in revenue, many international regions experienced declines. The company ended the quarter with solid liquidity, supported by strong operating cash flow.

Key Highlights

• 1Total revenues decreased by 12% to $4.8 billion for the three months ended August 31, 2009, compared to the prior year period.
• 2Net income remained stable at $513.0 million, representing a 0% change year-over-year.
• 3Diluted earnings per share increased by 1% to $1.04.
• 4Gross margin percentage declined by 100 basis points to 46.2%, influenced by increased discounts and unfavorable foreign exchange.
• 5Selling and administrative expenses decreased by 17% to $1,546.1 million, driven by lower demand creation and operating overhead.
• 6The effective tax rate decreased to 24.7% from 28.5% in the prior year period.
• 7Worldwide futures and advance orders were down 6% for the period September 2009 - January 2010.

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