10-QPeriod: Q2 FY2021

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2020

Filed January 5, 2021For Securities:NKE

Summary

NIKE, Inc. reported strong performance in its second quarter of fiscal year 2021, ending November 29, 2020. Revenues grew by 9% year-over-year to $11.2 billion, driven by a 7% increase on a currency-neutral basis. This growth was primarily fueled by the NIKE Brand, which saw a 9% increase in revenues, with a significant 30% surge in NIKE Direct sales (and an impressive 80% increase in digital sales). The company demonstrated resilience amidst the ongoing COVID-19 pandemic, with strategic inventory management leading to a 17% decrease in inventory levels compared to the prior fiscal year's end. Net income rose by 12% to $1.25 billion, translating to diluted earnings per share of $0.78, up from $0.70 in the prior year's quarter. The company’s strategic focus on digital transformation and direct-to-consumer (DTC) channels continues to yield positive results, as evidenced by the substantial growth in NIKE Direct sales, which now represent 40% of total NIKE Brand revenues. While gross margin experienced a slight decline due to increased promotions and a shift in sales mix, the company successfully managed its selling and administrative expenses, which decreased by 2%. Geographically, Greater China and Europe, Middle East & Africa (EMEA) showed particularly strong revenue growth, with increases of 24% and 17% respectively. Despite some operational challenges related to the pandemic, NIKE's financial health remains robust, supported by strong liquidity with $11.8 billion in cash, cash equivalents, and short-term investments.

Financial Highlights

48 data points
Beta

Revenue

$11.24B

43.1% Gross Margin

Net Income

$1.25B

11.1% Net Margin

EPS (Diluted)

$0.78

Total Assets

$34.84B

Cash & Equivalents

$8.63B

Free Cash Flow

$2.31B

Financial Statements
Beta
Revenue$11.24B
Cost of Revenue$6.40B
Gross Profit$4.85B
SG&A Expenses$3.27B
Net Income$1.25B
EPS (Basic)$0.80
EPS (Diluted)$0.78
Shares Outstanding (Basic)1.57B
Shares Outstanding (Diluted)1.61B

Key Highlights

  • 1Revenue increased 9% to $11.2 billion for the second quarter ended November 30, 2020.
  • 2Net income rose 12% to $1.25 billion, with diluted EPS up 11% to $0.78.
  • 3NIKE Direct revenues surged 30% (currency-neutral), with digital sales growing 80%, now representing 40% of total NIKE Brand revenues.
  • 4Inventories decreased by 17% compared to May 31, 2020, reflecting effective supply and demand management.
  • 5Demand creation expenses decreased 17% due to reduced marketing costs amid COVID-19, while operating overhead expenses increased 4% due to strategic investments and restructuring costs.
  • 6Greater China and EMEA regions demonstrated strong revenue growth of 24% and 17%, respectively.
  • 7The company maintained a strong liquidity position with $11.8 billion in cash, cash equivalents, and short-term investments.

Frequently Asked Questions

NIKE reported a 9% increase in revenues for the second quarter ended November 30, 2020, reaching $11.2 billion. On a currency-neutral basis, revenues grew by 7%, indicating solid underlying business performance.

NIKE's digital strategy is a significant growth driver. NIKE Direct revenues increased by 30% on a currency-neutral basis, with digital sales alone growing by an impressive 80%. This channel now accounts for 40% of total NIKE Brand revenues, highlighting the success of the Consumer Direct Acceleration strategy.

NIKE has successfully managed its inventory, with levels decreasing by 17% compared to the end of the previous fiscal year. This is attributed to intentional supply and demand management and strong digital sales growth, helping to mitigate potential overstock issues.

For the second quarter, total selling and administrative expenses decreased by 2% year-over-year. Demand creation expenses were down 17% due to reduced marketing activities related to COVID-19. However, operating overhead expense increased by 4% due to ongoing investments in digital capabilities and restructuring costs, with expectations for demand creation expense to increase in future periods as events resume.