10-QPeriod: Q1 FY2019

NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2018

Filed October 5, 2018For Securities:NKE

Summary

NIKE, Inc. reported a strong first quarter for fiscal year 2019, with revenues increasing by 10% to $9.9 billion, driven by broad-based growth across its NIKE Brand geographies and the Converse segment. On a currency-neutral basis, revenue growth was 9%. Net income rose by 15% to $1,092 million, with diluted earnings per common share increasing to $0.67 from $0.57 in the prior year, reflecting both top-line growth and improved operating leverage. The company's effective tax rate increased to 14.0% from 11.4%, primarily due to the impact of the U.S. Tax Cuts and Jobs Act. Gross margin improved by 50 basis points to 44.2%, benefiting from higher full-price average selling prices (ASP) and a favorable sales mix, partially offset by increased product costs. The company continued to execute its Consumer Direct Offense strategy, with NIKE Direct revenues growing 12% on a currency-neutral basis, supported by a significant 34% increase in digital commerce sales.

Financial Highlights

49 data points
Beta

Revenue

$9.95B

44.2% Gross Margin

Net Income

$1.09B

11.0% Net Margin

EPS (Diluted)

$0.67

Total Assets

$22.48B

Cash & Equivalents

$3.28B

Free Cash Flow

$958.00M

Financial Statements
Beta
Revenue$9.95B
Cost of Revenue$5.55B
Gross Profit$4.40B
SG&A Expenses$3.06B
Net Income$1.09B
EPS (Basic)$0.69
EPS (Diluted)$0.67
Shares Outstanding (Basic)1.59B
Shares Outstanding (Diluted)1.63B

Key Highlights

  • 1Total revenues grew 10% to $9.9 billion, with a 9% increase on a currency-neutral basis.
  • 2Net income increased 15% to $1,092 million, and diluted EPS rose to $0.67 from $0.57.
  • 3Gross margin improved by 50 basis points to 44.2%, driven by higher full-price ASP and favorable mix.
  • 4NIKE Direct revenue grew 12% on a currency-neutral basis, with digital commerce sales up 34%.
  • 5Greater China experienced robust revenue growth of 24% (20% currency-neutral), showcasing strong market expansion.
  • 6The company repurchased approximately $1.36 billion of common stock during the quarter, reflecting a strong commitment to returning capital to shareholders.
  • 7The effective tax rate increased to 14.0% due to the U.S. Tax Cuts and Jobs Act.

Frequently Asked Questions

Revenue growth was primarily driven by a 10% increase in total revenues, reaching $9.9 billion. This growth was broad-based across NIKE Brand geographies and the Converse segment, with a 9% increase on a currency-neutral basis. Strong performance in Greater China (up 24%) and continued growth in NIKE Direct channels, particularly digital commerce which surged by 34%, were key contributors.

The U.S. Tax Cuts and Jobs Act led to an increase in Nike's effective tax rate to 14.0% for the quarter, up from 11.4% in the prior year's comparable quarter. The company is still analyzing the full impact and provisional amounts recorded related to the tax reform.

The growth in NIKE Direct (up 12% currency-neutral) and especially digital commerce sales (up 34%) highlights Nike's successful execution of its Consumer Direct Offense strategy. This shift towards direct-to-consumer channels allows for greater consumer connection, higher margins, and better control over brand experience, which is crucial for future growth.

Nike reported a 50 basis point improvement in gross margin to 44.2%. This was achieved through higher full-price average selling prices (ASP) and a more favorable sales mix, indicating reduced promotional activity. While product costs increased, the company effectively offset these pressures through pricing and mix strategies.