10-QPeriod: Q2 FY2011

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

Filed January 6, 2011For Securities:NKE

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.

Financial Highlights

49 data points
Beta

Revenue

$4.84B

45.3% Gross Margin

Net Income

$457.00M

9.4% Net Margin

EPS (Diluted)

$0.23

Total Assets

$14.46B

Cash & Equivalents

$1.77B

Free Cash Flow

$333.00M

Financial Statements
Beta
Revenue$4.84B
Cost of Revenue$2.65B
Gross Profit$2.19B
SG&A Expenses$1.61B
Net Income$457.00M
EPS (Basic)$0.24
EPS (Diluted)$0.23
Shares Outstanding (Basic)1.91B
Shares Outstanding (Diluted)1.95B

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.

Frequently Asked Questions

Revenue growth was driven by increased demand for NIKE Brand footwear and apparel across most geographies, particularly in North America and Emerging Markets. Additionally, the company's Other Businesses, including Cole Haan and Converse, also contributed significantly to the revenue increase.

NIKE's gross margin percentage improved by 80 basis points to 45.3% in the second quarter of fiscal year 2011. This improvement was primarily due to a higher mix of full-priced sales, fewer discounts on close-out products, positive impacts from cost reduction initiatives, and the growth and expanding profitability of the Direct-to-Consumer business. These factors more than offset increased freight costs.

NIKE continued to execute its share repurchase program, buying back approximately $797 million of its common stock in the first six months of fiscal year 2011 under a $5 billion program approved in September 2008. This demonstrates a commitment to returning capital to shareholders, funded by operating cash flow, excess cash, and potentially debt.

NIKE actively manages its exposure to foreign currency fluctuations through a centralized risk management program using derivative instruments like forward contracts and options. These are used for both transactional and translational exposures to mitigate the impact on reported consolidated results. The company also uses available-for-sale investments in foreign subsidiaries to hedge translation risks.