10-QPeriod: Q3 FY2015

NIKE, Inc. Quarterly Report for Q3 Ended Feb 28, 2015

Filed April 7, 2015For Securities:NKE

Summary

NIKE, Inc.'s Q3 FY15 filing (ending February 28, 2015) demonstrates robust financial performance with a 7% increase in revenue to $7.5 billion and a 16% rise in net income to $791 million, reaching $0.89 per diluted share. This growth was primarily fueled by a strong performance in constant currency, with a 13% revenue increase, driven by broad-based strength across all NIKE Brand geographies and solid growth in the Converse segment. The company experienced significant gross margin expansion of 140 basis points to 45.9%, attributed to higher average selling prices driven by product mix shifts and price increases, as well as growth in the higher-margin Direct to Consumer (DTC) business. While selling and administrative expenses increased, they grew at a slower pace than revenue, contributing to overall profitability. Management highlighted continued investments in digital capabilities and operational infrastructure to support future growth, particularly within the DTC channel, which saw substantial revenue growth. Looking ahead, futures orders for NIKE Brand products were up 2% reported and 11% in constant currency, indicating continued demand. The company continues to execute its capital allocation strategy, with significant share repurchases underway. Overall, the filing reflects a company executing well on its growth strategies, driving both top-line and bottom-line improvements.

Financial Highlights

50 data points
Beta

Revenue

$7.46B

45.9% Gross Margin

Net Income

$791.00M

10.6% Net Margin

EPS (Diluted)

$0.45

Total Assets

$20.54B

Cash & Equivalents

$3.02B

Free Cash Flow

$1.55B

Financial Statements
Beta
Revenue$7.46B
Cost of Revenue$4.03B
Gross Profit$3.43B
SG&A Expenses$2.38B
Net Income$791.00M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)1.72B
Shares Outstanding (Diluted)1.77B

Key Highlights

  • 1Revenues increased 7% to $7.5 billion, with a strong 13% increase on a constant currency basis, driven by broad geographic and category strength.
  • 2Net income grew 16% to $791 million, resulting in diluted earnings per share of $0.89, a 19% increase.
  • 3Gross margin improved by 140 basis points to 45.9%, driven by higher average selling prices and a favorable shift in product mix.
  • 4Direct-to-Consumer (DTC) revenue continued its strong growth trajectory, increasing 29% on a constant currency basis in Q3, underscoring the success of digital and physical retail channel investments.
  • 5Converse delivered robust constant currency revenue growth of 33% in Q3, significantly outpacing the NIKE Brand's performance.
  • 6The company actively repurchased shares, spending $1.86 billion on repurchases in the nine-month period, indicating a commitment to returning capital to shareholders.
  • 7Futures orders, a key leading indicator, showed a 2% reported and 11% constant currency increase, signaling continued demand for upcoming periods.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance on a constant currency basis, with a 13% increase. This was fueled by broad-based growth across all NIKE Brand geographies and categories, as well as a significant 33% constant currency revenue increase from Converse.

NIKE achieved a significant 140 basis point improvement in gross margin to 45.9%, mainly due to higher average selling prices and a favorable product mix, alongside growth in the higher-margin Direct to Consumer (DTC) business. While selling and administrative expenses increased, they grew at a slower pace than revenue, contributing to a 16% increase in net income.

The company reported that futures orders for NIKE Brand footwear and apparel, scheduled for delivery from March 2015 through July 2015, were up 2% on a reported basis and 11% excluding currency impacts. This indicates continued strong consumer demand for the upcoming periods.

NIKE continued its active share repurchase program, spending $1.86 billion on repurchasing Class B Common Stock during the first nine months of fiscal 2015 under its $8 billion program. This demonstrates a commitment to enhancing shareholder value through capital returns.