NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2010

Summary

NIKE, Inc. (NKE) reported strong financial results for the second quarter and first six months of fiscal year 2011, ending November 30, 2010. Revenue increased by 10% to $4.8 billion for the quarter and 9% to $10.0 billion year-to-date. Net income saw a significant jump of 22% to $457 million for the quarter and 14% to $1.016 billion year-to-date. Diluted earnings per share also grew substantially, up 24% to $0.94 for the quarter and 16% to $2.08 year-to-date. The company attributed the revenue growth to increased demand for NIKE Brand products across most geographies, particularly in North America and Emerging Markets, and strong performance from its Other Businesses. Gross margin improved by 80 basis points to 45.3% for the quarter, driven by a higher mix of full-priced sales, fewer discounts, and growth in the Direct-to-Consumer business. While selling and administrative expenses increased, they were managed effectively as a percentage of revenue, resulting in improved operating leverage. The company also continued its share repurchase program, buying back $797 million in the first six months of fiscal 2011.

Key Highlights

• 1Revenue increased by 10% to $4.8 billion in Q2 FY2011 and by 9% to $10.0 billion for the first six months of FY2011.
• 2Net income rose by 22% to $457 million in Q2 FY2011 and by 14% to $1.016 billion year-to-date.
• 3Diluted EPS increased by 24% to $0.94 in Q2 FY2011 and by 16% to $2.08 year-to-date.
• 4Gross margin improved by 80 basis points to 45.3% in Q2 FY2011, driven by favorable pricing and sales mix.
• 5Strong revenue growth was observed in North America and Emerging Markets for the NIKE Brand.
• 6The Direct-to-Consumer business continued its robust growth, up 13% on a currency-neutral basis in Q2 FY2011.
• 7NIKE continued its capital return program, repurchasing approximately $797 million of common stock in the first six months of FY2011.

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