earnings

NIKE, Inc. Reports Fiscal 2019 Fourth Quarter and Full Year Results

BEAVERTON, Ore., June 27, 2019 - NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2019 fourth quarter and full year ended May 31, 2019.

Fourth quarter revenue increased to $10.2 billion, up 4 percent on a reported basis and up 10 percent on a currency-neutral basis*. Full year revenue rose to $39.1 billion, up 7 percent on a reported basis and up 11 percent on a currency-neutral basis, as strategic investments in innovation and digital drove global consumer demand led by NIKE Direct in both periods.

“FY19 was a pivotal year for NIKE as we continue to bring our Consumer Direct Offense to life throughout the marketplace,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our distinctive innovation and digital advantage led to accelerated growth across our complete portfolio, while our Brand fueled deeper relationships with consumers around the globe.”**
Diluted earnings per share in the fourth quarter was $0.62 driven by revenue growth, strong gross margin expansion, and a lower average share count, partially offset by higher selling and administrative expense and a higher tax rate. Diluted earnings per share for the full year was $2.49.

“Reflecting on our FY19 performance, it is clear that growth is paramount at NIKE, and that our strong growth is being driven by strategic transformation,” said Andy Campion, Executive Vice President and CFO, NIKE, Inc. “Amid foreign exchange volatility, our double-digit currency-neutral revenue growth and expanding ROIC showcase NIKE’s unrivaled ability to create extraordinary value for consumers and shareholders over the long term.”**

Fourth Quarter Income Statement Review

• Revenues for NIKE, Inc. increased 4 percent to $10.2 billion, up 10 percent on a currency- neutral basis.
Revenues for the NIKE Brand were $9.7 billion, up 10 percent on a currency-neutral basis, driven by growth across NIKE Direct and wholesale, key categories including Sportswear, Jordan and Basketball, and continued growth across footwear and apparel.
Revenues for Converse were $491 million, flat to prior year on a currency-neutral basis, mainly driven by double-digit growth in Asia and digital which was offset by declines in the U.S. and Europe.

• Gross margin increased 80 basis points to 45.5 percent due primarily to higher average selling prices, impacts from foreign currency, and growth in NIKE Direct. These benefits were partially offset by higher product costs and supply chain investments.

• Selling and administrative expense increased 9 percent to $3.4 billion. Demand creation expense was $1.0 billion, up 3 percent to prior year due to global brand campaigns and key sports moments. Operating overhead expense increased 12 percent to $2.4 billion driven primarily by wage-related and administrative expenses, which reflect critical investments in innovation, data and analytics, and new capabilities to accelerate our end-to-end digital transformation.

• The effective tax rate was 20.4 percent, compared to 6.4 percent for the same period last year, due to several discrete impacts within the prior period, including adjustments to the provisional charges related to the enactment of the Tax Cuts and Jobs Act (the "Tax Act").

• Net income was $989 million and diluted earnings per share was $0.62 driven by strong revenue growth, gross margin expansion, and a lower average share count, which were slightly offset by higher selling and administrative expense and a higher tax rate.

Fiscal 2019 Income Statement Review

• Revenues for NIKE, Inc. rose 7 percent to $39.1 billion, up 11 percent on a currency-neutral basis.

- Revenues for the NIKE Brand were $37.2 billion, up 11 percent on a currency-neutral basis driven by growth across NIKE Direct and wholesale, key categories including Sportswear, Jordan and Running, and double-digit growth across footwear and apparel.
- NIKE Direct revenues were $11.8 billion, up 16 percent on a currency-neutral basis, driven by a 35 percent increase in digital commerce sales, 6 percent growth in comparable store sales as well as the addition of new stores. Sales to wholesale customers increased 10%.
- Revenues for Converse were $1.9 billion, up 3 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and digital which was partially offset by declines in the U.S. and Europe.

• Gross margin increased 90 basis points to 44.7 percent due primarily to higher average selling prices, impacts from foreign currency, and growth in NIKE Direct. These benefits were partially offset by higher product costs.

• Selling and administrative expense increased 10 percent to $12.7 billion. Demand creation expense was $3.8 billion, up 5 percent to prior year due to sports marketing investments, global brand campaigns, key sports moments and new product launches. Operating overhead expense increased 13 percent to $8.9 billion driven primarily by wage-related and administrative expenses, which reflect critical investments in innovation, data and analytics, and new capabilities to accelerate our end-to-end digital transformation.

• The effective tax rate was 16.1 percent, compared to 55.3 percent for the same period last year, due to significant charges related to the enactment of the Tax Act in the prior year.

Net income increased to $4.0 billion and diluted earnings per share was $2.49 driven by strong revenue growth, gross margin expansion, a lower average share count and a lower tax rate, which was partially offset by higher selling and administrative expense.

May 31, 2019 Balance Sheet Review

• Inventories for NIKE, Inc. were $5.6 billion, up 7 percent compared to the prior year period, with healthy inventory levels across all geographies.
• Cash and equivalents and short-term investments were $4.7 billion, $582 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income.

Share Repurchases

During the fourth quarter, NIKE, Inc. repurchased 10.6 million shares for approximately $897 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of May 31, 2019, a total of 11.6 million had been repurchased under this program for approximately $986 million.

In fiscal 2019, NIKE, Inc. repurchased a total of 54.3 million shares for approximately $4.3 billion under the above mentioned $15 billion program currently in use as well as the previous $12 billion program approved by the Board of Directors in November 2015.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on June 27, 2019, to review fiscal fourth quarter and full year results. The conference call will be broadcast live via webcast and can be accessed at http://investors.nike.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, July 11, 2019.

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, Inc. subsidiary brands include Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories; and Hurley, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.nike.com. Individuals can also visit http://news.nike.com and follow @NIKE.

* See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure.

** The marked paragraph contains 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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

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