10-QPeriod: Q1 FY2014

NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2013

Filed October 7, 2013For Securities:NKE

Summary

Nike, Inc. reported strong performance for the first quarter of fiscal year 2014, with revenues increasing by 8% to $7.0 billion and net income from continuing operations up 33% to $780 million. Diluted earnings per share also saw a significant increase of 37% to $0.86. This growth was driven by broad-based revenue increases across most geographies and product categories, with the NIKE Brand, comprising over 90% of total revenue, showing robust performance, and Converse experiencing an 18% revenue increase. The company highlighted improved gross margins, which expanded by 120 basis points to 44.9%, attributed to lower product costs, a favorable product mix, and growth in the higher-margin Direct to Consumer (DTC) business. While demand creation expenses decreased year-over-year, operating overhead increased due to investments in digital capabilities and DTC expansion. The company also benefited from a lower effective tax rate, contributing to the strong bottom-line results.

Financial Highlights

50 data points
Beta

Revenue

$6.97B

44.9% Gross Margin

Net Income

$779.00M

11.2% Net Margin

EPS (Diluted)

$0.43

Total Assets

$17.67B

Cash & Equivalents

$2.66B

Free Cash Flow

$373.00M

Financial Statements
Beta
Revenue$6.97B
Cost of Revenue$3.84B
Gross Profit$3.13B
SG&A Expenses$2.06B
Operating Income$780.00M
Net Income$779.00M
EPS (Basic)$0.44
EPS (Diluted)$0.43
Shares Outstanding (Basic)1.78B
Shares Outstanding (Diluted)1.82B

Key Highlights

  • 1Revenues increased 8% to $7.0 billion in the first quarter of fiscal year 2014.
  • 2Net income from continuing operations rose 33% to $780 million.
  • 3Diluted earnings per share from continuing operations grew 37% to $0.86.
  • 4Gross margin improved by 120 basis points to 44.9%.
  • 5NIKE Brand revenues grew 7% (7% excluding currency), with notable strength in North America and Western Europe.
  • 6Converse revenues increased 18% (16% excluding currency).
  • 7Direct to Consumer (DTC) revenues grew 18% on a currency-neutral basis, representing 20% of total NIKE Brand revenues.

Frequently Asked Questions

Nike reported an 8% increase in revenues, reaching $7.0 billion for the first quarter of fiscal year 2014, compared to $6.5 billion in the prior year period. Excluding the impact of currency fluctuations, the revenue growth remained strong at 8%.

Profitability saw significant improvement. Net income from continuing operations increased by 33% to $780 million, and diluted earnings per share from continuing operations rose by 37% to $0.86. This was driven by higher revenues, improved gross margins, and a lower effective tax rate.

The company's gross margin improved by 120 basis points to 44.9%. This improvement was primarily attributed to lower NIKE Brand product costs (approx. 90 bps) due to easing raw material costs and a shift to higher-margin products, higher NIKE Brand average net selling prices (approx. 40 bps) from lower discounts and price increases, and growth in the higher-margin NIKE Brand Direct to Consumer (DTC) business (approx. 20 bps).

Nike operates globally and manages foreign exchange risk centrally. While the company uses derivative instruments to hedge certain exposures, currency fluctuations had a minor impact on consolidated reported revenue growth in this quarter. The company provided currency-neutral growth figures to better illustrate underlying business trends, showing consistent growth across most geographies for the NIKE Brand, with Greater China being an exception.