What was the primary driver of revenue growth in the third quarter?

Revenue growth was primarily driven by a strong performance in NIKE Direct, with digital sales increasing by 36% year-over-year. Growth was also seen across EMEA, APLA, and North America regions.

How did COVID-19 affect Nike's Q3 results?

COVID-19 had a material negative impact, particularly in Greater China where revenues declined by 4% currency-neutral due to temporary store closures and reduced operating hours. Globally, Nike began closing stores in mid-March 2020 to curb the spread of the virus, anticipating further adverse impacts.

What is the non-recurring charge and why was it incurred?

Nike incurred a $400 million non-recurring, non-cash charge related to the execution of agreements to transition its brand businesses in Brazil, Argentina, Chile, and Uruguay to a strategic distributor model. This charge primarily reflects the anticipated release of associated cumulative foreign currency translation losses.

What is the current status of Nike's operations in China?

While Greater China revenues were down 4% currency-neutral in Q3, the situation began to recover. By late March 2020, nearly 80% of Nike-owned and partner stores in Greater China had reopened and were operating at normal hours, with digital demand remaining strong.

NKE 8-K SEC Disclosure — Mar 25, 2020

Summary

Nike, Inc. reported its third-quarter fiscal 2020 results, showing continued revenue growth driven by a strong digital performance, with total revenues up 5% year-over-year (7% on a currency-neutral basis) to $10.1 billion. Diluted earnings per share (EPS) stood at $0.53, which was negatively impacted by a $0.25 non-recurring charge related to the transition of its South American businesses to a distributor model and the adverse effects of the emerging COVID-19 pandemic, particularly in Greater China. The company highlighted significant digital sales growth of 36% globally, underscoring its strategic focus on direct-to-consumer channels. However, the report also detailed the initial impacts of COVID-19, including temporary store closures in Greater China and the beginning of widespread closures outside of China as the pandemic spread. While Greater China experienced a revenue decline of 4% on a currency-neutral basis for the quarter, the company noted a recovery in store reopenings and digital demand by late March. The report also provided an update on inventory, which increased 7% to $5.8 billion, but noted a decline in closeout inventory units.

Key Highlights

1Q3 FY2020 revenues increased 5% to $10.1 billion (7% currency-neutral), driven by 36% digital sales growth.
2Diluted EPS of $0.53 was impacted by a $0.25 non-recurring charge for South America distributor transition and COVID-19 impacts.
3COVID-19 began to materially impact Greater China revenues, down 4% currency-neutral, with temporary store closures and reduced operating hours.
4As of March 16, 2020, Nike temporarily closed stores globally (outside of Greater China, Japan, and Korea) due to the pandemic.
5Nike's inventory rose 7% to $5.8 billion, but closeout inventory units decreased year-over-year.
6The company transitioned its South America (Brazil, Argentina, Chile, Uruguay) businesses to a strategic distributor model, incurring a $400 million non-recurring charge.
7Gross margin decreased by 80 basis points due to COVID-19 impacts (lower mix in high-margin Greater China) and increased rebates.

NIKE, Inc. 8-K Report, Corporate Update (Mar 25, 2020)

Summary

Key Highlights

Frequently Asked Questions