Earnings per share for the quarter rose 6 percent as a result of continued strong demand for NIKE, Inc. brands, SG&A expense leverage and a lower average share count, which more than offset the impact of a lower gross margin.
Revenues up 18 percent to $5.7 billion, up 16 percent excluding currency changes
Diluted earnings per share up 6 percent to $1.00
Worldwide futures orders up 13 percent
Inventories up 35 percent
BEAVERTON, Ore., Dec. 20, 2011 – NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2012 second quarter ended November 30, 2011. Earnings per share for the quarter rose 6 percent as a result of continued strong demand for NIKE, Inc. brands, SG&A expense leverage and a lower average share count, which more than offset the impact of a lower gross margin.
“Our strong second quarter results demonstrate that the NIKE, Inc. portfolio is a powerful engine for growth,” said Mark Parker, President and CEO, NIKE, Inc. “We’re able to accomplish this by staying focused on what we do best – deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders. Going forward we’ll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers.”*
Second Quarter Income Statement Review
Revenues for NIKE, Inc. increased 18 percent to $5.7 billion, up 16 percent on a currency-neutral basis. Excluding the impacts of changes in foreign currency, NIKE Brand revenues rose 18 percent with growth in every geography except Japan and in all key categories except Action Sports. Revenues for Other Businesses increased 5 percent with minimal impact from changes in currency exchange rates, as growth at Converse more than offset lower revenues at NIKE Golf, Cole Haan, Hurley and Umbro.
Gross margin declined 260 basis points to 42.7 percent due primarily to higher product costs, which more than offset the positive effects of growing sales in our Direct to Consumer operations, price increases and ongoing product cost reduction initiatives.
Selling and administrative expenses grew at a lower rate than revenue, up 13 percent to $1.8 billion. Demand creation expenses increased 12 percent to $644 million driven by marketing support for key product initiatives and investments in consumer events for the NIKE Brand. Operating overhead expenses increased 13 percent to $1.2 billion due to additional investments made in our wholesale and Direct to Consumer businesses.
Other expense, net was $9 million, primarily comprised of net foreign exchange losses, partially offset by non-recurring items. For the quarter, we estimate the year-over-year change in foreign currency related gains and losses included in Other expense, net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits decreased Income before income taxes by approximately $17 million.
The Effective tax rate was 24.1 percent compared to 25.0 percent for the same period last year, an improvement due primarily to a reduction in the effective tax rate on operations outside the United States.
Net income increased 3 percent to $469 million and Diluted earnings per share increased 6 percent to $1.00, reflecting a 4 percent decline in the weighted average diluted common shares outstanding.
November 30, 2011 Balance Sheet Review
Inventories for NIKE, Inc. were $3.2 billion, up 35 percent from November 30, 2010. Inventories were higher compared to a year ago due to significantly higher average unit product cost and growth in total units. NIKE Brand inventories were up 39 percent. Approximately 20 percentage points of the increase was due to higher wholesale unit inventories as a result of strong demand and more timely deliveries from our product suppliers. The remaining 19 percentage points of the increase in NIKE Brand inventories were primarily a result of significantly higher product input costs. Relative to revenues and futures, current unit inventories remain broadly consistent with levels reported prior to the 2009 – 2010 economic downturn.
Cash and short-term investments were $3.4 billion, $1.4 billion lower than last year as higher working capital investments reduced free cash flow from operations, while share repurchases, dividend payments and long-term debt payments also increased year-on-year.
During the second quarter, a total of 7.6 million shares were repurchased for approximately $672 million as part of our four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the second quarter, a total of 45.6 million shares were repurchased for approximately $3.6 billion under this program.
As of the end of the quarter worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from December 2011 through April 2012, totaled $8.9 billion, 13 percent higher than orders reported for the same period last year. Changes in foreign currency exchange rates did not have a significant impact on reported futures orders.*
Nike management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2011, to review second quarter results. The conference call will be broadcast live over the Internet and can be accessed at http://investors.nikeinc.com. For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, December 27, 2011.
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 International Limited, which designs, distributes and licenses athletic and casual footwear, apparel and equipment, primarily for global football (soccer). For more information, NIKE’s earnings releases and other financial information are available on the Internet at http://investors.nikeinc.com.
* 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 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. [PDF]
View the NIKE, Inc. Q2 FY12 financial schedules and key financial metrics calculations. [PDF]
View the official NIKE, Inc. Q1 FY12 earnings call transcript. [ PDF]
The One Star Hotel is located at 155 New N Rd Hoxton, London N1 6TA and will be open February 16 and 17 from 12 p.m. to 6 p.m. and 8 p.m. to late.
The One Star Hotel is located at 155 New N Rd Hoxton, Lon...
This game-changing evolution of Nike Flyknit construction - that debuts today on the Mercurial Superfly 360 and Mercurial Vapor 360 - offers a more precise fit that enables ultimate agility and quickness.
This game-changing evolution of Nike Flyknit construction...
Following the unveil of the first-ever Jordan Brand NBA All-Star Edition uniforms, the brand will welcome a new generation to experience greatness during basketball’s mid-season spectacular.
Following the unveil of the first-ever Jordan Brand NBA A...
These two new colorways will be available February 14 on nike.com and at...
Musician Justin Timberlake collaborated with Nike designer Tinker...
It launches February 10 on SNKRS and at select retailers.
Many of London's top sports heroes - including Mo Farah and Harry Kane - and artists, as well as 258 real-life young Londoners, make an appearance in Nike's latest film, Nothing Beats a Londoner, that puts a spotlight on the city's vibrant youth culture and inclusive sports community.
Many of London's top sports heroes - including Mo Farah a...
Special athlete and collaborator apparel and footwear makeups will be available on nike.com and at select retailers beginning February 15.
Special athlete and collaborator apparel and footwear mak...
The Italian designer’s latest NikeLab collection offers a new take on the Air Force 1 and basketball inspired garments, including a jersey, jersey dress and pullover hoodie. The new Nike x RT collection will be available February 16.
The Italian designer’s latest NikeLab collection offers a...
For the 20th anniversary of the Mercurial, Nike debuts a new 360 fit on its best boot yet. Mercurial 360 will debut on pitch this weekend and will be available February 14 on nike.com.
For the 20th anniversary of the Mercurial, Nike debuts a ...
The 20-year NBA veteran settles into his retirement by pushing his signature line forward for the next generation of basketball greats. The new shoe will be available February 17 on nike.com and select Nike retailers.
The 20-year NBA veteran settles into his retirement by pu...
The Nike Mercurial Touch Elite gloves reduce the bulk and stiffness of traditional mitts to unleash the ultimate potential of a goalkeeper's hands.
The Nike Mercurial Touch Elite gloves reduce the bulk and...
The new shin guards feature small spikes on top of the face of the guard that safely pierce the sock, locking it into place. The game-changing design will be available Fall 2018.
The new shin guards feature small spikes on top of the fa...
The Nike Merlin football for the 2018-2019 season incorporates advanced design, materials and construction. It will be available Summer 2018.
The Nike Merlin football for the 2018-2019 season incorpo...
Jersey Shop is Nike’s new mobile-first, go-to store for the best soccer kits. It also invites creative communities to get involved in facilitating the design, manufacture and sale of the shop's shirts.
Jersey Shop is Nike’s new mobile-first, go-to store for t...