BEAVERTON, Ore., Sept. 25, 2018 – NIKE, Inc. (NYSE:NKE) today reported fiscal 2019 financial results for its first quarter ended August 31, 2018. For the quarter, double-digit revenue growth was driven by the continued success of the Consumer Direct Offense, which fueled growth across all geographies as well as wholesale and NIKE Direct, led by digital.
“NIKE’s Consumer Direct Offense, combined with our deep line up of innovation, is driving strong momentum and balanced growth across our entire business,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our expanded digital capabilities are accelerating our complete portfolio and creating value across all dimensions as we connect with and serve consumers.”*
Diluted earnings per share for the quarter were $0.67, an increase of 18 percent driven by strong revenue growth, gross margin expansion, selling and administrative expense leverage, and a lower average share count, partially offset by a higher effective tax rate.
“We are delivering stronger global growth and profitability than we anticipated entering this fiscal year,” said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. “While foreign exchange volatility has increased, our underlying currency-neutral momentum continues to build as we transform how NIKE operates, drives growth and creates value for our shareholders.”*
First Quarter Income Statement Review
Revenues for NIKE, Inc. increased 10 percent to $9.9 billion, up 9 percent on a currency-neutral basis.**
Revenues for the NIKE Brand were $9.4 billion, up 10 percent on a currency-neutral basis driven by double-digit growth internationally and in NIKE Direct, strong momentum in North America, and growth in almost every category led by Sportswear.
Revenues for Converse were $527 million, up 7 percent on a currency-neutral basis, mainly driven by growth in Europe and Asia.
Gross margin increased 50 basis points to 44.2 percent primarily due to higher average selling prices, favorable full-price sales mix and margin expansion in NIKE Direct, partially offset by higher product costs.
Selling and administrative expense increased 7 percent to $3.1 billion. Demand creation expense was $964 million, up 13 percent primarily driven by sports marketing investments, brand campaigns and key sports moments. Operating overhead expense increased 5 percent to $2.1 billion driven by investments in capabilities to drive the Consumer Direct Offense, particularly in NIKE Direct and global operations.
The effective tax rate was 14 percent, which reflects the new U.S. statutory rate and implemented provisions of the U.S. Tax Cuts and Jobs Act.
Net income increased 15 percent to $1.1 billion driven primarily by strong revenue growth, gross margin expansion and selling and administrative expense leverage while diluted earnings per share increased 18 percent from the prior year to $0.67 reflecting a 2.5 percent decline in the weighted average diluted common shares outstanding.
August 31, 2018 Balance Sheet Review
Inventories for NIKE, Inc. were $5.2 billion, flat to prior year, primarily driven by a clean marketplace with healthy inventories across all geographies due to strong full-price sell through on new innovation.
Cash and equivalents and short-term investments were $4.3 billion, $1.3 billion lower than last year as share repurchases, dividends and investments in infrastructure more than offset net income and proceeds from employee exercises of stock options.
During the first quarter, NIKE, Inc. repurchased a total of 17.8 million shares for approximately $1.4 billion as part of the four-year, $12 billion program approved by the Board of Directors in November 2015. As of August 31, 2018, a total of 167.2 million shares had been repurchased under this program for approximately $10.1 billion. In June 2018, the Board of Directors authorized a new four- year $15 billion share repurchase program that will commence upon the completion of the current program.
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 25, 2018, to review fiscal first quarter results. The conference call will be broadcast live over the Internet and can be accessed at https://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, October 2, 2018.
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 https://investors.nike.com. Individuals can also visit https://news.nike.com and follow @NIKE.
* 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.
** See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure.