10-QPeriod: Q2 FY2016

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2015

Filed January 6, 2016For Securities:NKE

Summary

NIKE, Inc. reported solid financial results for the second quarter and first six months of fiscal year 2016, demonstrating continued revenue growth and improved profitability. Revenues for the second quarter of fiscal 2016 increased by 4% to $7.7 billion, or 12% on a constant currency basis, driven by robust performance across most geographic segments, particularly North America and Greater China. Net income for the quarter rose 20% to $785 million, with diluted earnings per share increasing 22% to $0.45. This growth was supported by a higher gross margin of 45.6% and effective management of selling and administrative expenses. The company's strategic focus on Direct to Consumer (DTC) channels, including online sales and company-owned stores, continues to be a significant growth driver, showing strong double-digit constant currency growth and increasing its contribution to overall revenues. The company also announced a new $12 billion share repurchase program, underscoring its commitment to returning value to shareholders.

Financial Highlights

50 data points
Beta

Revenue

$7.69B

45.6% Gross Margin

Net Income

$785.00M

10.2% Net Margin

EPS (Diluted)

$0.45

Total Assets

$22.58B

Cash & Equivalents

$3.85B

Free Cash Flow

$257.00M

Financial Statements
Beta
Revenue$7.69B
Cost of Revenue$4.18B
Gross Profit$3.50B
SG&A Expenses$2.56B
Net Income$785.00M
EPS (Basic)$0.46
EPS (Diluted)$0.45
Shares Outstanding (Basic)1.71B
Shares Outstanding (Diluted)1.75B

Key Highlights

  • 1Revenues increased 4% to $7.7 billion for the second quarter of fiscal 2016, with a strong 12% growth on a constant currency basis.
  • 2Net income grew 20% to $785 million, and diluted earnings per share increased 22% to $0.45, reflecting improved profitability.
  • 3Gross margin improved to 45.6% from 45.1% in the prior year period, driven by higher average selling prices and favorable product mix.
  • 4Direct to Consumer (DTC) revenues, including online and owned stores, saw substantial growth (26% in constant currency for Q2), increasing its share of total NIKE Brand revenues to approximately 24%.
  • 5Futures orders for the NIKE Brand, scheduled for delivery from December 2015 through April 2016, were up 15% (20% excluding currency), indicating strong future demand.
  • 6The company announced a new $12 billion share repurchase program, signaling confidence and commitment to shareholder returns.
  • 7Effective tax rate decreased significantly to 19.1% for the quarter, primarily due to favorable changes in intercompany transactions and a higher proportion of earnings from lower-tax international operations.

Frequently Asked Questions

NIKE reported a 4% increase in revenues to $7.7 billion for the second quarter of fiscal year 2016. On a constant currency basis, excluding the impact of foreign exchange fluctuations, revenues grew by a more robust 12%.

Profitability showed significant improvement. Net income increased by 20% to $785 million, and diluted earnings per common share rose by 22% to $0.45 compared to the second quarter of fiscal year 2015. This was supported by gross margin expansion and effective management of selling and administrative expenses.

NIKE's Direct to Consumer (DTC) channel, which includes company-owned stores and online sales, continues to be a key growth driver. DTC revenues grew substantially (26% in constant currency for Q2) and now represent approximately 24% of total NIKE Brand revenues, up from 21% in the prior year period, indicating a successful shift towards higher-margin direct sales.

NIKE demonstrated its commitment to shareholder returns by announcing a new four-year, $12 billion share repurchase program, which will commence upon the completion of its existing $8 billion program. This signals strong financial health and confidence in future cash flows.