Summary
NIKE, Inc.'s second-quarter fiscal year 2018 filing for the period ending November 29, 2017, shows a 5% increase in revenue to $8.6 billion, driven by strong performance in international markets, particularly EMEA, Greater China, and Asia Pacific & Latin America. Despite revenue growth, net income decreased by 9% to $767 million, and diluted EPS fell by 8% to $0.46. This decline was primarily attributed to a lower gross margin, down 120 basis points to 43.0%, and a 10% increase in selling and administrative expenses. The company continues to execute its Consumer Direct Offense strategy, with NIKE Direct revenues growing 15% on a currency-neutral basis, signifying a strategic shift towards direct-to-consumer channels and digital commerce. Key challenges include a decline in North American revenue and EBIT, alongside pressure on gross margins from unfavorable foreign currency exchange rates and higher product costs. The company also faces ongoing investments in its digital transformation and organizational realignment, impacting operating overhead. Investors should note the significant increase in the effective tax rate to 12.7% from 24.4% in the prior year quarter, largely due to the adoption of new accounting standards for stock-based compensation. The company also disclosed the anticipated material impact of the recently enacted U.S. Tax Cuts and Jobs Act, which will lead to additional one-time income tax expense in the upcoming quarter.
Financial Highlights
50 data points| Revenue | $8.55B |
| Cost of Revenue | $4.88B |
| Gross Profit | $3.68B |
| SG&A Expenses | $2.77B |
| Net Income | $767.00M |
| EPS (Basic) | $0.47 |
| EPS (Diluted) | $0.46 |
| Shares Outstanding (Basic) | 1.63B |
| Shares Outstanding (Diluted) | 1.66B |
Key Highlights
- 1Revenue increased by 5% to $8.55 billion for the three months ended November 30, 2017, driven by growth in international segments like EMEA and Greater China.
- 2Net income for the quarter decreased by 9% to $767 million, and diluted EPS fell by 8% to $0.46 compared to the prior year period.
- 3Gross margin contracted by 120 basis points to 43.0%, primarily due to unfavorable foreign currency exchange rates, higher product costs, and lower NIKE Direct margins.
- 4Selling and administrative expenses increased by 10% to $2.77 billion, driven by higher demand creation and operating overhead costs.
- 5NIKE Direct revenues (NIKE-owned retail and e-commerce) grew 15% on a currency-neutral basis, now representing 31% of NIKE Brand revenues, highlighting the company's strategic shift.
- 6North America revenue declined by 5% to $3.49 billion, with a corresponding 14% decrease in EBIT, indicating challenges in its largest market.
- 7The effective tax rate improved significantly to 12.7% from 24.4% in the prior year quarter, influenced by the adoption of ASU 2016-09 regarding stock-based compensation.