10-QPeriod: Q2 FY2024

NIKE, Inc. Quarterly Report for Q2 Ended Nov 30, 2023

Filed January 5, 2024For Securities:NKE

Summary

NIKE, Inc. reported a slight increase in revenue for the second quarter of fiscal year 2024, reaching $13.4 billion, a 1% rise on a reported basis and a 1% decrease on a currency-neutral basis. This performance reflects a mixed consumer environment with cautious spending and high promotional activity. The company's direct-to-consumer (DTC) channel showed resilience, with revenues growing 6% and representing approximately 45% of total NIKE Brand revenues. Gross margin improved by 170 basis points to 44.6%, driven by strategic pricing and lower freight costs, though partially offset by foreign currency fluctuations and increased product input costs. While overall revenue growth was modest, the company demonstrated effective cost management, with total selling and administrative expenses remaining stable as a percentage of revenue. NIKE also continued its commitment to returning capital to shareholders, repurchasing shares and issuing dividends. The company announced a significant enterprise initiative in December 2023, which includes streamlining operations and is expected to result in restructuring charges of $400-$450 million, primarily in the third quarter of fiscal 2024.

Financial Highlights

47 data points
Beta

Revenue

$13.39B

44.6% Gross Margin

Net Income

$1.58B

11.8% Net Margin

EPS (Diluted)

$1.03

Total Assets

$37.20B

Cash & Equivalents

$7.92B

Free Cash Flow

$2.61B

Financial Statements
Beta
Revenue$13.39B
Cost of Revenue$7.42B
Gross Profit$5.97B
SG&A Expenses$4.15B
Net Income$1.58B
EPS (Basic)$1.04
EPS (Diluted)$1.03
Shares Outstanding (Basic)1.52B
Shares Outstanding (Diluted)1.53B

Key Highlights

  • 1Revenue increased 1% to $13.4 billion in Q2 FY24, but decreased 1% on a currency-neutral basis, indicating a challenging consumer environment.
  • 2NIKE Direct revenue grew 6% to $5.7 billion, representing 45% of total NIKE Brand revenue, highlighting the strength of the company's direct-to-consumer strategy.
  • 3Gross margin expanded by 170 basis points to 44.6%, driven by strategic pricing and reduced freight costs, partially offset by currency impacts and higher input costs.
  • 4Inventories decreased 6% to $8.0 billion compared to May 31, 2023, indicating effective inventory management.
  • 5The company returned approximately $1.7 billion to shareholders in Q2 FY24 through share repurchases and dividends.
  • 6A new enterprise initiative was announced, involving streamlining operations and leading to anticipated pre-tax restructuring charges of $400-$450 million.
  • 7Footwear revenue was flat on a currency-neutral basis, with strong average selling price (ASP) growth offsetting a 6% decrease in unit sales.

Frequently Asked Questions

NIKE, Inc. reported revenues of $13.4 billion for the second quarter of fiscal year 2024, representing a 1% increase on a reported basis and a 1% decrease on a currency-neutral basis compared to the prior year. This performance was influenced by a cautious consumer environment and high promotional activity.

The consolidated gross margin increased by 170 basis points to 44.6%. This improvement was primarily driven by higher NIKE Brand full-price Average Selling Price (ASP), net of discounts, due to strategic pricing actions and lower discounts, along with lower ocean freight rates. These benefits were partially offset by unfavorable foreign currency exchange rates and higher product input costs.

NIKE's inventory levels decreased by 6% to $8.0 billion as of November 30, 2023, compared to May 31, 2023. This reduction was primarily driven by a decrease in units, indicating effective inventory management in response to market dynamics.

NIKE announced an enterprise initiative in December 2023 designed to accelerate future growth through organizational streamlining. This initiative is expected to result in pre-tax restructuring charges of approximately $400 million to $450 million, primarily related to employee severance costs, which are largely anticipated to be recognized in the third quarter of fiscal year 2024.