Fiscal 2010 Fourth Quarter and Full Year Results
June 22, 2010
Fourth quarter revenues up 8 percent versus prior year to $5.1 billion; up 4 percent excluding currency changes
Fiscal 2010 revenues down 1 percent from prior year to $19.0 billion; down 2 percent excluding currency changes
Fourth quarter diluted EPS of $1.06 up 51 percent versus prior year; excluding non-comparable items, diluted EPS up 7 percent
Fiscal 2010 diluted EPS of $3.86 up 27 percent from prior year; excluding non-comparable items diluted EPS up 1 percent
Worldwide futures orders up 7 percent; up 10 percent excluding currency changes
Inventories down 13 percent versus prior year
BEAVERTON, Ore. (June 23, 2010) – NIKE, Inc. (NYSE:NKE) today reported financial results for its 2010 fiscal fourth quarter and full year ended May 31, 2010. Fourth quarter revenues increased 8 percent to $5.1 billion from $4.7 billion for the same period last year. Excluding changes in currency exchange rates, net revenues were up 4 percent compared to the same period last year. For the full year, revenues declined 1 percent to $19.0 billion, compared to $19.2 billion last year. Excluding currency changes, net revenues were down 2 percent for the year. Fourth quarter net income increased 53 percent to $522 million and diluted earnings per share increased 51 percent to $1.06. Fiscal 2010 net income increased 28 percent to $1.9 billion and diluted earnings per share increased 27 percent to $3.86.
In fiscal 2009, NIKE, Inc. incurred a $145 million after-tax restructuring charge in the fourth quarter, and third quarter results included a $241 million, after-tax non-cash charge related to the impairment of goodwill, intangible and other assets of the Company’s Umbro subsidiary. Excluding these charges, fourth quarter net income and diluted earnings per share both increased 7 percent. For the full-year, comparable net income increased 2 percent and diluted earnings per share increased 1 percent.
“We finished strong with a great quarter and accelerating momentum across the business,” said Mark Parker, President and Chief Executive Officer of NIKE, Inc. “During tough economic times our goal is to deliver solid financial performance and create competitive separation in the marketplace. We did that in 2010,”
“Nike is at its best when we focus on our two core values – innovation and inspiration.” Parker continued, “Going forward you can expect to see more game-changing products, more compelling experiences wherever consumers touch our brands, and a laser focus on operational and financial excellence. These are the things that allow us to accelerate first and faster than everybody else.”*
The Company reported worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from June through November 2010, totaling $8.8 billion, 7 percent higher than orders reported for the same period last year. Excluding currency changes, orders would have increased 10 percent.*
By geography and in total for the NIKE Brand, futures orders were as follows:
North America During the fourth quarter, revenue for North America increased 4 percent to $1.8 billion. Footwear revenue was up 1 percent to $1.2 billion, apparel revenue increased 13 percent to $447 million and equipment revenue was essentially flat at $90 million. Earnings before interest and taxes (EBIT) for North America improved 8 percent to $435 million.
North America revenue for the full fiscal year was down 1 percent to $6.7 billion. Footwear revenue decreased 2 percent to $4.6 billion, apparel revenue was flat at $1.7 billion and equipment revenue increased 1 percent to $346 million. North America EBIT grew 8 percent to $1.5 billion for the fiscal year.
Western Europe During the fourth quarter, revenue for Western Europe increased 2 percent to $956 million. Footwear revenue increased 1 percent to $593 million, apparel revenue was up 8 percent to $309 million and equipment declined 12 percent to $54 million. EBIT for Western Europe decreased 17 percent to $193 million.
For the full fiscal year, revenue for Western Europe was down 6 percent to $3.9 billion. Footwear revenue decreased 3 percent to $2.3 billion, apparel revenue declined 9 percent to $1.3 billion and equipment revenue dropped 15 percent to $247 million. Compared to last year, EBIT decreased 9 percent to $856 million.
Central and Eastern Europe In the fourth quarter, revenue for Central and Eastern Europe was 9 percent better than the same period last year at $332 million. Footwear increased 9 percent to $199 million, apparel revenue grew 10 percent to $109 million and equipment improved 2 percent to $25 million. EBIT for Central and Eastern Europe decreased 9 percent to $84 million.
Revenue for Central and Eastern Europe declined 16 percent for the fiscal year to $1.1 billion. Footwear revenue decreased 12 percent to $660 million, apparel revenue dropped 21 percent to $399 million and equipment revenue declined 20 percent to $91 million. Compared to last year, EBIT decreased 32 percent to $281 million.
Greater China Fourth quarter revenue for Greater China grew 12 percent to $464 million. Footwear revenue increased 14 percent to $246 million, apparel was up 10 percent to $193 million and equipment improved 17 percent to $25 million. EBIT for Greater China increased 20 percent to $187 million.
For fiscal 2010 Greater China revenue was essentially flat to the prior year at $1.7 billion. Footwear revenue grew 1 percent to $953 million, apparel revenue declined 2 percent to $684 million and equipment revenue improved 1 percent to $105 million. Fiscal 2010 EBIT for Greater China grew 11 percent to $637 million.
Japan Japan’s fourth quarter revenue declined 8 percent to $261 million. Compared to the prior year, footwear revenue was basically flat at $129 million, apparel revenue was down 13 percent at $105 million and equipment revenue dropped 17 percent to $27 million. EBIT declined 6 percent in the fourth quarter to $61 million.
Fiscal 2010 revenue for Japan declined 5 percent to $882 million. Compared to last year, footwear revenue increased 1 percent while apparel and equipment revenue declined 10 percent and 7 percent respectively. EBIT for Japan was down 12 percent for the year at $180 million.
Emerging Markets In the Emerging Markets, revenue was up 47 percent to $556 million for the fourth quarter. Footwear revenue increased 42 percent to $355 million, apparel revenue rose 70 percent to $162 million and equipment revenue increased 19 percent to $39 million. EBIT for the Emerging Markets in the fourth quarter improved 46 percent to $114 million.
Full fiscal year revenue for the Emerging Markets was up 20 percent to $2.0 billion. Footwear revenue was up 23 percent to $1.4 billion, apparel revenue increased 22 percent to $532 million and equipment revenue declined 3 percent to $154 million. EBIT for the Emerging Markets improved 44 percent to $493 million for the year.
Other Businesses Revenue in the fourth quarter for Other Businesses, which includes Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd., increased 9 percent to $714 million while EBIT improved 71 percent to $73 million.
For the full fiscal year Other Businesses revenue increased 5 percent to $2.5 billion. EBIT for the fiscal year was $299 million versus a loss of $193 million last year. Last year’s results included a $401 million pre-tax non-cash impairment charge to reduce the carrying value of Umbro’s goodwill, intangible and other assets. Excluding this charge, EBIT increased 43 percent compared to the same period last year.
Income Statement Review
For both the fourth quarter and full fiscal year, gross margins improved. In the fourth quarter of fiscal 2010 gross margins were 47.4 percent compared to 43.4 percent for the same period last year. For the fiscal year, gross margins were 46.3 percent compared to 44.9 percent last year. Gross margins for the fourth quarter and fiscal year were higher than the prior year primarily due to improved in-line product margins, fewer close-out sales, and growth and improved profitability of owned retail and Other Businesses.
Fourth quarter selling and administrative expenses grew 25 percent to $1.7 billion. Selling and administrative expenses for the quarter were higher than the same period last year mainly due to higher demand creation spending, which increased 43 percent to $666 million, and increasing operational overhead spending that rose 16 percent to $1.1 billion reflecting investments in Company owned retail and higher costs for performance-based compensation. For the full fiscal year, selling and administrative expenses were up 3 percent to $6.3 billion. Full fiscal year demand creation spending was relatively flat to the prior year at $2.4 billion while operational overhead spending increased 5 percent to $4.0 billion mainly due to investments in Company owned retail and higher costs for performance-based compensation.
The effective tax rate for the fourth quarter was 23.6 percent compared to 29.8 percent for the same period last year. For the fiscal year, our effective tax rate was 24.2 percent compared to 24.0 percent last year. Excluding the tax effect of the charge for the impairment of Umbro assets, the effective tax rate for fiscal 2009 would have been 26.5 percent.
Balance Sheet Review
At the end of the fiscal year, global inventories stood at $2.0 billion, down 13 percent from May 31, 2009. Cash and short-term investments at year-end were $5.1 billion, $1.7 billion or 49 percent higher than last year. Share Repurchase
During the fourth quarter, the Company repurchased a total of 2,884,008 shares for approximately $216 million under the Company’s four-year, $5 billion program approved in September 2008. For the fiscal year, the Company repurchased a total of 11.3 million shares for approximately $754 million.
Repurchases for the fiscal year were made in conjunction with two approved repurchase programs. In the third quarter of fiscal 2010 the Company completed its previous four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006 under which the Company purchased a total of 53.9 million shares. Having completed the previous program, the Company began repurchases under the four-year, $5 billion program approved in September 2008. Of the total shares repurchased during the fiscal year, 6.6 million shares for approximately $454 million were purchased under this program.
Nike management will host a conference call beginning at approximately 2:00 p.m. PT on June 23, 2010, to review fourth quarter and fiscal year results. The conference call will be broadcast live over the Internet and can be accessed at www.nikebiz.com/investors. For those unable to listen to the live broadcast, an archived version will be available at the same location through 10:00 p.m. PT, June 30, 2010.
About NIKE, Inc.
NIKE, Inc. based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned Nike subsidiaries include Cole Haan, which designs, markets and distributes luxury shoes, handbags, accessories and coats; Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories; and Umbro Ltd., a leading United Kingdom-based global football (soccer) brand. For more information, Nike’s earnings releases and other financial information are available on the Internet at www.nikebiz.com/investors.
* The marked paragraphs contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed from time to time in reports filed by NIKE, Inc. with the S.E.C., including Forms 8-K, 10-Q, and 10-K. Some forward-looking statements in this release concern changes in futures orders that are not necessarily indicative of changes in total revenues for subsequent periods due to the mix of futures and “at once” orders, exchange rate fluctuations, order cancellations and discounts, which may vary significantly from quarter to quarter, and because a significant portion of the business does not report futures orders.
View the press release and financial tables