10-QPeriod: Q1 FY2025

NIKE, Inc. Quarterly Report for Q1 Ended Aug 31, 2024

Filed October 7, 2024For Securities:NKE

Summary

NIKE, Inc. reported revenues of $11.6 billion for the three months ended August 31, 2024, a decrease of 10% from $12.9 billion in the prior year period. This revenue decline was primarily driven by a decrease in North America and EMEA regions, as well as challenges in digital sales. The company's gross margin improved by 120 basis points to 45.4%, benefiting from lower product costs, reduced warehousing and logistics expenses, and strategic pricing actions. Despite the revenue headwinds, NIKE demonstrated operational improvements leading to a stronger gross margin. Net income for the quarter was $1.05 billion, down from $1.45 billion year-over-year, resulting in diluted earnings per share of $0.70 compared to $0.94. The company continued its commitment to shareholder returns, repurchasing $1.18 billion in stock and paying $558 million in dividends. Management cites cautious consumer spending and product portfolio rebalancing as key factors influencing the current performance.

Financial Highlights

47 data points
Beta

Revenue

$11.59B

45.4% Gross Margin

Net Income

$1.05B

9.1% Net Margin

EPS (Diluted)

$0.70

Total Assets

$37.87B

Cash & Equivalents

$8.48B

Free Cash Flow

$274.00M

Financial Statements
Beta
Revenue$11.59B
Cost of Revenue$6.33B
Gross Profit$5.26B
SG&A Expenses$4.05B
Net Income$1.05B
EPS (Basic)$0.70
EPS (Diluted)$0.70
Shares Outstanding (Basic)1.50B
Shares Outstanding (Diluted)1.50B

Key Highlights

  • 1Revenues declined 10% to $11.6 billion year-over-year, impacted by softer demand in key regions like North America and EMEA, and a significant drop in NIKE Direct digital sales.
  • 2Gross margin improved by 120 basis points to 45.4%, driven by lower product costs (ocean freight, input costs), reduced warehousing/logistics expenses, and strategic pricing.
  • 3Net income decreased by 28% to $1.05 billion, with diluted EPS falling to $0.70 from $0.94 in the prior year period.
  • 4The company returned approximately $1.8 billion to shareholders through share repurchases ($1.18 billion) and dividends ($558 million) during the quarter.
  • 5Inventories increased by 10% sequentially to $8.3 billion, primarily due to higher unit purchases, suggesting a cautious outlook on sales velocity.
  • 6Demand creation expenses increased by 15% year-over-year, reflecting strategic investments in brand marketing and key sports events.
  • 7The Greater China region showed resilience with a modest revenue decline of 3% (currency-neutral), driven by wholesale strength, though NIKE Direct sales saw a significant decrease.

Frequently Asked Questions

The primary reasons for the 10% year-over-year revenue decline to $11.6 billion are softer revenues in key geographic segments like North America and EMEA, coupled with a significant decrease in NIKE Direct digital sales. The company also noted a strategic effort to rebalance its product portfolio and channel mix which impacted top-line performance.

NIKE's gross margin improved by 120 basis points to 45.4%. This improvement was primarily driven by lower NIKE Brand product costs, including reduced ocean freight rates and input costs. Additionally, lower warehousing and logistics costs, along with benefits from strategic pricing actions implemented in the prior year, contributed to the margin expansion.

Management noted that consumers continue to spend more cautiously due to uncertain macroeconomic and geopolitical conditions. Reflecting this cautious demand, inventories increased by 10% sequentially to $8.3 billion, mainly due to higher unit purchases. This suggests a more conservative approach to managing stock levels ahead of anticipated demand.

NIKE continues to prioritize shareholder returns. In the first quarter of fiscal 2025, the company repurchased approximately $1.18 billion of its common stock and paid $558 million in dividends, totaling $1.8 billion returned to shareholders. A significant portion of the $18 billion share repurchase program authorized in June 2022 remains available.