10-QPeriod: Q2 FY2020

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2019

Filed January 7, 2020For Securities:NKE

Summary

NIKE, Inc. reported a strong second quarter for fiscal year 2020, with revenues increasing 10% to $10.3 billion, or 13% on a currency-neutral basis. This growth was driven by broad-based performance across all geographic segments and a 12% currency-neutral increase in NIKE Brand revenues, notably in Sportswear and the Jordan Brand. Converse also showed robust growth with a 15% currency-neutral revenue increase. Profitability also saw significant improvement. Net income rose 32% to $1.1 billion, translating to diluted earnings per share of $0.70, up from $0.52 in the prior year. This improved profitability was attributed to revenue growth, gross margin expansion, and effective selling and administrative expense management. The company continues to focus on its "Triple Double" strategy through the Consumer Direct Offense, emphasizing innovation, speed to market, and direct consumer connections.

Financial Highlights

48 data points
Beta

Revenue

$10.33B

44.0% Gross Margin

Net Income

$1.11B

10.8% Net Margin

EPS (Diluted)

$0.70

Total Assets

$26.60B

Cash & Equivalents

$3.07B

Free Cash Flow

$674.00M

Financial Statements
Beta
Revenue$10.33B
Cost of Revenue$5.78B
Gross Profit$4.54B
SG&A Expenses$3.32B
Net Income$1.11B
EPS (Basic)$0.71
EPS (Diluted)$0.70
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.59B

Key Highlights

  • 1Revenues increased 10% year-over-year to $10.3 billion, with a 13% increase on a currency-neutral basis.
  • 2Net income grew 32% to $1.1 billion, and diluted EPS rose to $0.70 from $0.52.
  • 3NIKE Brand revenues increased 10% (12% currency-neutral), with strong performance in Sportswear and the Jordan Brand.
  • 4Converse revenues grew 13% (15% currency-neutral), indicating strong brand momentum.
  • 5Gross margin improved by 20 basis points to 44.0%, driven by higher full-price Average Selling Price (ASP) and growth in the higher-margin NIKE Direct business.
  • 6NIKE Direct revenues grew 15% (17% currency-neutral), with digital commerce sales up 38%.
  • 7Greater China showed exceptional growth, with revenues up 20% (23% currency-neutral).

Frequently Asked Questions

The primary driver of revenue growth was a broad-based increase across all NIKE Brand geographies and Converse, supported by strong demand for Sportswear and the Jordan Brand. Currency-neutral revenue growth was particularly strong at 13% for NIKE, Inc. overall.

Profitability significantly improved. Net income increased by 32% to $1.1 billion, and diluted earnings per share rose by 35% to $0.70. This was driven by revenue growth, an expansion in gross margin, and improved selling and administrative expense leverage.

NIKE Direct, which includes owned retail stores and digital platforms, is a key strategic focus for the company. In the second quarter, NIKE Direct revenues grew 15% (17% currency-neutral), representing approximately 33% of total NIKE Brand revenues. Digital commerce sales, a major component of NIKE Direct, saw an impressive 38% increase.

The company achieved selling and administrative expense leverage, meaning these expenses grew at a slower rate than revenues. Demand creation expense decreased slightly by 3% due to timing shifts in investments, while operating overhead expense increased by 9% due to investments in transformational capabilities, particularly in NIKE Direct and global operations.