10-QPeriod: Q2 FY2022

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2021

Filed January 6, 2022For Securities:NKE

Summary

NIKE, Inc. reported solid performance for the second quarter and first six months of fiscal year 2022, with revenues showing modest growth and net income increasing year-over-year. The company navigated ongoing supply chain challenges, including factory closures in Vietnam and Indonesia due to COVID-19, and extended inventory transit times, which impacted product availability, particularly in Greater China and Asia Pacific & Latin America. Despite these headwinds, NIKE's direct-to-consumer (DTC) business, including digital commerce and owned stores, demonstrated resilience and growth, highlighting the effectiveness of its Consumer Direct Acceleration strategy. Gross margins improved significantly due to lower promotional activity, a higher mix of full-price sales, and favorable foreign currency impacts, though partially offset by increased freight and logistics costs. The company's strategic investments in digital transformation and brand campaigns continue, with a focus on creating a premium and seamless consumer experience. While supply chain disruptions are expected to persist, NIKE remains committed to its long-term financial goals. The company also actively managed its capital through share repurchases and maintained a strong liquidity position.

Financial Highlights

49 data points
Beta

Revenue

$11.36B

45.9% Gross Margin

Net Income

$1.34B

11.8% Net Margin

EPS (Diluted)

$0.83

Total Assets

$38.92B

Cash & Equivalents

$10.75B

Free Cash Flow

$2.58B

Financial Statements
Beta
Revenue$11.36B
Cost of Revenue$6.14B
Gross Profit$5.21B
SG&A Expenses$3.76B
Net Income$1.34B
EPS (Basic)$0.84
EPS (Diluted)$0.83
Shares Outstanding (Basic)1.58B
Shares Outstanding (Diluted)1.62B

Key Highlights

  • 1Revenue for the second quarter of fiscal 2022 increased 1% to $11.4 billion, and for the first six months increased 8% to $23.6 billion.
  • 2Net income for the second quarter rose 7% to $1.337 billion, and for the first six months increased 16% to $3.211 billion.
  • 3Gross margin significantly improved, up 280 basis points in Q2 and 230 basis points in the first six months, driven by reduced promotions and a higher mix of full-price sales.
  • 4Direct-to-Consumer (DTC) revenues grew 8% currency-neutral in Q2 and 16% currency-neutral in the first six months, underscoring the strength of digital and owned retail channels.
  • 5Greater China revenues declined 20% on a reported basis (24% currency-neutral) in Q2 and 6% (13% currency-neutral) in the first six months, impacted by inventory supply issues and COVID-19 related closures.
  • 6The company repurchased $1.7 billion of common stock in the first six months of fiscal 2022, a significant increase from the prior year.
  • 7NIKE continued to invest in demand creation and operating overhead, with selling and administrative expenses increasing 15% in Q2 and 17% in the first six months, driven by strategic investments and increased marketing spend.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in North America and Europe, Middle East & Africa (EMEA), as well as robust growth in the Converse brand. The Direct-to-Consumer (DTC) channel, encompassing digital and owned retail, also showed significant growth, offsetting declines in Greater China and Asia Pacific & Latin America which were impacted by supply chain disruptions.

Supply chain disruptions, including factory closures in Vietnam and Indonesia due to COVID-19 and extended transit times, led to reduced product availability. This disproportionately affected revenues in Greater China and Asia Pacific & Latin America. The company expects these challenges to continue impacting product availability and potentially increasing costs in the near term.

The improvement in gross margin was primarily attributed to lower promotional activity due to limited inventory availability, a higher mix of full-price sales (on a wholesale equivalent basis), and favorable foreign currency exchange rates. These factors were partially offset by increased freight and logistics costs.

NIKE continues to return capital to shareholders through its share repurchase program. In the first six months of fiscal 2022, the company repurchased approximately $1.7 billion of common stock. The company also maintains a strong liquidity position with approximately $15.1 billion in cash, cash equivalents, and short-term investments as of November 30, 2021.