What were the primary drivers of Nike's revenue growth in Q2 FY04?

Revenue growth was driven by a combination of factors including strong performance in international markets (Asia Pacific and Americas regions showing significant growth), a rebound in the U.S. market, favorable currency exchange rates, and the contribution from the Converse acquisition. Stronger wholesale footwear margins and improved in-line pricing also contributed positively.

How did currency fluctuations impact Nike's financial results?

Stronger foreign currencies, particularly the Euro, provided a significant tailwind for Nike's reported revenues and gross margins. Approximately six percentage points of revenue growth and about 30 basis points of gross margin improvement were attributable to currency movements. While currency translation of foreign profits was a net positive, the company also experienced some foreign currency losses.

What is Nike's outlook for the remainder of fiscal year 2004?

Nike anticipates delivering double-digit revenue growth for the full fiscal year, exceeding prior guidance, driven by continued currency strength and accelerated future orders. The company expects mid to high teens revenue growth for the third quarter and high single-digit growth for the fourth quarter. Gross margins are expected to continue tracking ahead of prior year levels, and significant expansion in pretax profit margins is anticipated.

How is the relationship with Foot Locker evolving, and what is its impact?

Nike is working to normalize its relationship with Foot Locker, emphasizing brand presentation and controlled distribution. While sales to Foot Locker declined 8% in the quarter, sales to other U.S. accounts advanced 6%. Nike has launched a new '20' program with Foot Locker focused on basketball and training, which has shown strong early results. Management believes the relationship is improving and is comfortable with the progress and future opportunities.

NKE 8-K SEC Disclosure — Dec 22, 2003

Summary

NIKE, Inc. reported strong fiscal 2004 second-quarter results, exceeding expectations with a 13% revenue increase year-over-year. This growth was driven by broad-based strength across its international and U.S. segments, with particular highlights in the Asia Pacific region (18% revenue growth) and the Americas (17% revenue growth). The company also saw a significant improvement in gross margin, up 210 basis points to 42.3%, primarily due to higher product margins in wholesale footwear and reduced foreign currency impacts. Diluted earnings per share saw a robust 16% increase. Nike is demonstrating strong cash flow generation, reflected in substantial share repurchases and a significant 43% increase in its quarterly dividend. Management expressed optimism about the accelerating industry momentum, particularly in the U.S. market, and provided a positive outlook for double-digit revenue growth for the full fiscal year, driven by strong future orders and continued currency tailwinds.

Key Highlights

1Revenue increased by 13% year-over-year, reaching $2.4 billion.
2Diluted earnings per share grew by 16% to $0.43.
3Consolidated gross margin improved by 210 basis points to 42.3%.
4International revenues grew 12%, with Asia Pacific up 18% and Europe up 9%.
5U.S. revenues increased by 5%, with strong growth in wholesale footwear and Nike-owned retail.
6The company repurchased over $100 million of stock and raised its quarterly dividend by 43% to $0.20 per share.
7Future orders for the next five months increased by 9.7%, indicating strong demand.

NIKE, Inc. 8-K Report (Dec 22, 2003)

Summary

Key Highlights

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