- Fourth quarter revenues up 6 percent to
$8.2 billion; 9 percent growth excluding currency changes
- Fourth quarter diluted earnings per
share flat to prior year at $0.49
- Fiscal 2016 revenues up 6 percent to
$32.4 billion; 12 percent growth excluding currency changes
- Fiscal 2016 diluted earnings per share
up 17 percent to $2.16
- Worldwide futures orders up 8 percent;
11 percent growth excluding currency changes
- Inventories as of May 31, 2016 up 12
percent
NIKE, Inc. (NYSE:NKE) today reported fiscal 2016 financial
results for its fourth quarter and full year ended May 31, 2016.
Strong global demand fueled revenue increases across nearly all
geographies in fiscal 2016, while robust international revenue
drove growth in the fourth quarter.
Diluted earnings per share for the quarter were $0.49 as
international momentum and a lower average share count were offset
by a higher tax rate; a gross margin decline partially due to the
clearance of excess inventory in North America; and higher selling
and administrative expense.
Fiscal 2016 diluted earnings per share rose 17 percent to $2.16,
reflecting revenue growth of 6 percent, gross margin expansion, a
lower tax rate and a lower average share count.
“Our consistent growth is fueled by innovation, which is why
fiscal 2016 was such a breakthrough year for NIKE in everything we
do,” said Mark Parker, President and CEO, NIKE, Inc. “From product
to manufacturing to how we serve our consumers – more personally
and at scale – we’ve raised the bar of what’s possible. It’s a
great time to be in sports, and the NIKE Brand has never been
stronger. Fueled by our unrivaled roster of athletes, fiscal 2017’s
calendar of sport moments promises to build on our business
momentum and inspire consumers.”*
Fourth Quarter Income Statement Review
- Revenues for NIKE, Inc. rose 6
percent to $8.2 billion, up 9 percent on a currency-neutral basis.
- Revenues for the NIKE Brand were $7.7
billion, up 8 percent on a currency-neutral basis driven by
double-digit growth in Western Europe, Greater China, Emerging
Markets and Japan, including strong growth in Sportswear, Global
Football and the Jordan Brand.
- Revenues for Converse were $513
million, up 18 percent on a currency-neutral basis, mainly driven
by a major system go-live that accelerated orders from the fourth
quarter to the third quarter in the prior year.
- Gross margin declined 30 basis
points to 45.9 percent as higher average selling prices were more
than offset by higher product costs, the negative impact of
clearing excess inventory in North America and unfavorable changes
in foreign currency exchange rates.
- Selling and administrative
expense increased 7 percent to $2.8 billion. Demand creation
expense was $873 million, up 7 percent, reflecting investments in
digital demand creation, sports marketing and brand events which
were partially offset by lower advertising expense. Operating
overhead expense increased 7 percent to $1.9 billion, reflecting
continued growth in the Direct-to-Consumer (DTC) business, and
targeted investments in operational infrastructure and
consumer-focused digital capabilities.
- Other income, net was $58
million, primarily comprised of net foreign currency exchange
gains. For the quarter, the Company estimates the year-over-year
change in foreign currency-related gains and losses included in
other income, net, combined with the impact of changes in exchange
rates on the translation of foreign currency-denominated profits,
decreased pretax income by approximately $66 million.
- The effective tax rate was 21.2
percent, compared to 17.8 percent for the same period last year,
primarily due to adjustments in the prior year to reduce tax
expense recognized in the interim quarters of fiscal 2015 on
intercompany transactions.
- Net income decreased 2 percent
to $846 million as revenue growth was more than offset by lower
gross margin, higher selling and administrative expense and a
higher tax rate, while diluted earnings per share remained
unchanged from the prior year at $0.49 reflecting a 2 percent
decline in the weighted average diluted common shares
outstanding.
Fiscal 2016 Income Statement Review
- Revenues for NIKE, Inc. rose 6
percent to $32.4 billion, up 12 percent on a currency-neutral
basis.
- Revenues for the NIKE Brand were $30.5
billion, up 13 percent excluding the impact of changes in foreign
currency.
- NIKE Brand sales to wholesale customers
increased 9 percent on a currency-neutral basis while DTC revenues
grew to $7.9 billion, up 25 percent excluding the impact of changes
in foreign currency, driven by a 51 percent increase in online
sales, the addition of new stores and 10 percent growth in
comparable store sales. As of May 31, 2016, the NIKE Brand had 919
DTC stores in operation as compared to 832 a year ago.
- On a currency neutral basis, NIKE Brand
revenue growth was driven by robust growth in every geography as
well as most key categories including Sportswear, Running and the
Jordan Brand. Our Men’s, Women’s and Young Athletes’ businesses all
grew double-digits.
- Revenues for Converse were $2.0
billion, up 2 percent on a currency neutral basis, mainly driven by
strong growth in the United States and Asia Pacific, slightly
offset by lower sales in Europe.
- Gross margin expanded 20 basis
points to 46.2 percent primarily driven by higher average selling
prices and growth in the higher margin DTC business which were
partially offset by higher product costs, the negative impact of
foreign currency exchange rates, and the impact from clearing
excess inventory in North America.
- Selling and administrative
expense grew 6 percent to $10.5 billion. Demand creation
expense was $3.3 billion, up 2 percent, reflecting investments in
DTC marketing, brand events and sports marketing, which were
partially offset by lower advertising expense. Operating overhead
expense increased 8 percent to $7.2 billion due to the expanding
DTC business, and targeted investments in operational
infrastructure and consumer-focused digital capabilities.
- Other income, net was $140
million for the fiscal year, mainly comprised of net foreign
currency exchange gains. For the year, the Company estimates the
year-over-year change in foreign currency-related gains and losses
included in other income, net, combined with the impact of changes
in currency exchange rates on the translation of foreign
currency-denominated profits, decreased pretax income by
approximately $423 million.
- The effective tax rate was 18.7
percent, compared to 22.2 percent in the prior year, primarily due
to an increase in the proportion of earnings from operations
outside of the United States, which are generally subject to a
lower tax rate.
- Net income increased 15 percent
to $3.8 billion reflecting strong global revenue growth, gross
margin expansion and a lower tax rate. Diluted earnings per share
increased 17 percent to $2.16, reflecting growth in net income and
the additional benefit of a decline in the weighted average diluted
common shares outstanding.
May 31, 2016 Balance Sheet Review
- Inventories for NIKE, Inc. were
$4.8 billion, up 12 percent from May 31, 2015, driven by a 6
percent increase in NIKE Brand wholesale unit inventories,
increases in average product cost per unit, and growth in our DTC
business, partially offset by changes in the value of inventories
due to foreign currency exchange rates.
- Cash and short-term investments
were $5.5 billion, $467 million lower than last year as growth in
net income and proceeds from the issuance of debt in the second
quarter were more than offset by share repurchases, investments in
infrastructure and working capital, higher dividends, and a
reduction in collateral received from counterparties to foreign
currency hedging instruments.
Share Repurchases
During the fourth quarter, NIKE, Inc. repurchased a total of 9.0
million shares for approximately $540 million as part of the
four-year, $12 billion program approved by the Board of Directors
in November 2015. As of the end of fiscal 2016, a total of 20.1
million shares had been repurchased under this program for
approximately $1.2 billion, at an average cost of $59.21 per
share.
In fiscal 2016, NIKE, Inc. repurchased a total of 55.4 million
shares for approximately $3.2 billion, at an average cost of
$58.44, under the new $12 billion program currently in use as well
as the previous $8 billion program approved by the Board of
Directors in September 2012.
Futures Orders
As of May 31, 2016, worldwide futures orders for NIKE Brand
athletic footwear and apparel scheduled for delivery from June
through November 2016 totaled $14.9 billion, 8 percent higher than
orders reported for the same period last year, and 11 percent
higher on a currency neutral basis.*
Conference Call
NIKE, Inc. management will host a conference call beginning at
approximately 2:00 p.m. PT on June 28, 2016, to review fiscal
fourth quarter and full year results. The conference call will be
broadcast live over the Internet 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 5, 2016.
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, distributes and licenses casual
sneakers, apparel and accessories; and Hurley, which designs and
distributes a line of action sports and youth lifestyle 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 and individuals can follow @NIKE.
* 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 Securities and
Exchange Commission (SEC), 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,
“at once” and closeout orders, exchange rate fluctuations, order
cancellations, discounts and returns, which may vary significantly
from quarter to quarter, and because a portion of the business does
not report futures orders.
NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS
ENDED % TWELVE MONTHS ENDED % (Dollars in
millions, except per share data)
5/31/2016
5/31/2015 Change
5/31/2016
5/31/2015 Change Revenues $ 8,244 $
7,779 6 % $ 32,376 $ 30,601 6 % Cost of sales 4,458
4,186 6 %
17,405 16,534 5 % Gross profit
3,786 3,593 5 % 14,971 14,067 6 % Gross margin 45.9 % 46.2 % 46.2 %
46.0 % Demand creation expense 873 819 7 % 3,278 3,213 2 %
Operating overhead expense 1,893
1,776 7 % 7,191
6,679 8 % Total selling and administrative
expense 2,766 2,595 7 % 10,469 9,892 6 % % of revenue 33.6 % 33.4 %
32.3 % 32.3 % Interest expense (income), net 5 4 — 19 28 —
Other (income) expense, net (58 ) (58 )
— (140 ) (58 )
— Income before income taxes 1,073 1,052 2 % 4,623
4,205 10 % Income tax expense 227
187 21 % 863
932 -7 % Effective tax rate 21.2 % 17.8
% 18.7 % 22.2 %
NET INCOME
$ 846 $ 865
-2 % $ 3,760
$ 3,273 15
% Earnings per common share: Basic $ 0.50 $ 0.50 0 %
$ 2.21 $ 1.90 16 % Diluted $ 0.49 $ 0.49 0 % $ 2.16 $ 1.85 17 %
Weighted average common shares outstanding: Basic 1,682.4
1,715.0 1,697.9 1,723.5 Diluted 1,723.1 1,759.6 1,742.5 1,768.8
Dividends declared per common share $ 0.16
$ 0.14 $ 0.62
$ 0.54
NIKE, Inc. CONSOLIDATED BALANCE SHEETS
May 31, May 31, (Dollars in millions)
2016 2015 % Change
ASSETS Current assets: Cash and equivalents $ 3,138 $ 3,852 -19%
Short-term investments 2,319 2,072 12% Accounts receivable, net
3,241 3,358 -3% Inventories 4,838 4,337 12% Prepaid expenses and
other current assets 1,489 1,968
-24% Total current assets 15,025 15,587 -4% Property,
plant and equipment, net 3,520 3,011 17% Identifiable intangible
assets, net 281 281 0% Goodwill 131 131 0% Deferred income taxes
and other assets1 2,439 2,587
-6%
TOTAL ASSETS $ 21,396
$ 21,597 -1%
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $ 44 $ 107 -59% Notes payable 1 74 -99%
Accounts payable 2,191 2,131 3% Accrued liabilities1 3,037 3,949
-23% Income taxes payable 85 71
20% Total current liabilities 5,358 6,332 -15%
Long-term debt 2,010 1,079 86% Deferred income taxes and other
liabilities1 1,770 1,479 20% Redeemable preferred stock — — —
Shareholders' equity 12,258
12,707 -4%
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 21,396 $
21,597 -1% 1 During the fourth
quarter of fiscal 2016, NIKE, Inc. adopted Accounting Standard
Update No. 2015-17, which requires all deferred tax assets and
deferred tax liabilities to be classified as non-current. All
periods presented have been updated to reflect these changes.
NIKE, Inc. DIVISIONAL REVENUES
% Change
% Change
Excluding
Excluding
THREE MONTHS ENDED %
Currency
TWELVE MONTHS ENDED %
Currency
(Dollars in millions)
5/31/2016
5/31/20151 Change
Changes2
5/31/2016
5/31/20151 Change
Changes2
North America Footwear $ 2,367 $ 2,317 2% 2% $ 9,299 $ 8,506
9% 10% Apparel 1,163 1,187 -2% -2% 4,746 4,410 8% 8% Equipment
205 228 -10% -10%
719 824 -13% -13% Total
3,735 3,732 0% 0% 14,764 13,740 7% 8%
Western Europe
Footwear 1,027 900 14% 15% 3,985 3,876 3% 14% Apparel 411 310 33%
34% 1,628 1,552 5% 16% Equipment 64 57
12% 13% 271 277
-2% 8% Total 1,502 1,267 19% 19% 5,884 5,705 3% 14%
Central & Eastern Europe Footwear 224 237 -5% -2% 882
827 7% 23% Apparel 102 102 0% 5% 463 499 -7% 9% Equipment
19 21 -10% 1%
86 95 -9% 7% Total 345 360 -4%
0% 1,431 1,421 1% 17%
Greater China Footwear 681 551 24% 28%
2,599 2,016 29% 33% Apparel 268 245 9% 14% 1,055 925 14% 17%
Equipment 30 33 -9% 1%
131 126 4% 7%
Total 979 829 18% 23% 3,785 3,067 23% 27%
Japan Footwear 187
145 29% 22% 570 452 26% 34% Apparel 70 63 11% 4% 228 230 -1% 5%
Equipment 23 22 5% -3%
71 73 -3% 3% Total
280 230 22% 15% 869 755 15% 22%
Emerging Markets Footwear
596 631 -6% 13% 2,536 2,641 -4% 14% Apparel 226 249 -9% 10% 947
1,021 -7% 11% Equipment 50 54
-7% 9% 218 236 -8%
11% Total 872 934 -7% 12% 3,701 3,898 -5% 13%
Global
Brand Divisions3 12 30
-60% -59% 73 115
-37% -30%
Total NIKE Brand 7,725
7,382 5% 8% 30,507
28,701 6% 13% Converse 513 435 18% 18%
1,955 1,982 -1% 2% Corporate4 6 (38)
— — (86) (82)
— —
Total NIKE, Inc. Revenues $ 8,244
$ 7,779 6% 9% $ 32,376 $
30,601 6% 12%
Total NIKE Brand Footwear
$ 5,082 $ 4,781 6% 9% $ 19,871 $ 18,318 8% 15% Apparel 2,240 2,156
4% 7% 9,067 8,637 5% 11% Equipment 391 415 -6% -3% 1,496 1,631 -8%
-2% Global Brand Divisions3 12 30
-60% -59% 73 115
-37% -30% 1 Certain prior year amounts have
been reclassified to conform to fiscal 2016 presentation. These
changes had no impact on previously reported results of operations
or shareholders' equity.
2 Fiscal 2016 results have been restated
using fiscal 2015 exchange rates for the comparative period to
enhance the visibility of the underlying business trends excluding
the impact of translation arising from foreign currency exchange
rate fluctuations.
3 Global Brand Divisions revenues are
primarily attributable to NIKE Brand licensing businesses that are
not part of a geographic operating segment.
4 Corporate revenues primarily consist of
foreign currency hedge gains and losses related to revenues
generated by entities within the NIKE Brand geographic operating
segments and Converse but managed through our central foreign
exchange risk management program.
NIKE,
Inc. SUPPLEMENTAL NIKE BRAND REVENUE DETAILS
% Change
Excluding
YEAR ENDED %
Currency
(Dollars in millions)
5/31/2016
5/31/20151 Change
Changes2
NIKE Brand Revenues by: Sales to Wholesale Customers $
22,577 $ 21,952 3% 9% Sales Direct to Consumer 7,857 6,634 18% 25%
Global Brand Divisions3 73 115
-37% -30%
Total NIKE Brand
Revenues $ 30,507 $
28,701 6% 13%
NIKE Brand Revenues on a Wholesale Equivalent
Basis:4 Sales to Wholesale Customers $ 22,577 $ 21,952
3% 9% Sales from our Wholesale Operations to Direct to Consumer
Operations 4,672 3,881
20% 27%
Total NIKE Brand Wholesale
Equivalent Revenues $ 27,249
$ 25,833 5%
12% NIKE Brand Wholesale Equivalent Revenues
by:4 Men's $ 15,410 $ 14,689 5% 11% Women’s 6,296 5,732
10% 17% Young Athletes' 4,560 4,301 6% 11% Others5
983 1,111 -12% -4%
Total NIKE Brand Wholesale Equivalent Revenues
$ 27,249 $ 25,833
5% 12% NIKE Brand
Wholesale Equivalent Revenues by:4 Running $ 5,017 $
4,863 3% 10% NIKE Basketball 1,378 1,385 -1% 2% Jordan Brand 2,753
2,329 18% 21% Football (Soccer) 2,143 2,250 -5% 7% Men’s Training
2,611 2,545 3% 6% Women’s Training 1,344 1,281 5% 11% Action Sports
711 737 -4% 3% Sportswear 7,513 6,604 14% 22% Golf 706 769 -8% -6%
Others6 3,073 3,070
0% 6%
Total NIKE Brand Wholesale Equivalent
Revenues $ 27,249 $
25,833 5% 12%
1 Certain prior year amounts have been
reclassified to conform to fiscal 2016 presentation. These changes
had no impact on previously reported results of operations or
shareholders' equity.
2 Fiscal 2016 results have been restated
using fiscal 2015 exchange rates for the comparative period to
enhance the visibility of the underlying business trends excluding
the impact of translation arising from foreign currency exchange
rate fluctuations.
3 Global Brand Divisions revenues are
primarily attributable to NIKE Brand licensing businesses that are
not part of a geographic operating segment.
4 References to NIKE Brand wholesale
equivalent revenues are intended to provide context as to the total
size of our NIKE Brand market footprint if we had no Direct to
Consumer operations. NIKE Brand wholesale equivalent revenues
consist of 1) sales to external wholesale customers and 2) internal
sales from our wholesale operations to our Direct to Consumer
operations which are charged at prices that are comparable to
prices charged to external wholesale customers.
5 Others include all unisex products,
equipment and other products not allocated to Men's, Women's and
Young Athletes', as well as certain adjustments that are not
allocated to products designated by gender or age.
6 Others include all other categories and
certain adjustments that are not allocated at the category
level.
NIKE,
Inc. EARNINGS BEFORE INTEREST AND TAXES1
THREE MONTHS ENDED % TWELVE MONTHS
ENDED % (Dollars in millions)
5/31/2016 5/31/20152
Change 5/31/2016
5/31/20152 Change North America $ 936 $
1,060 -12% $ 3,763 $ 3,645 3% Western Europe 308 277 11% 1,434
1,275 12% Central & Eastern Europe 46 71 -35% 289 249 16%
Greater China 357 266 34% 1,372 993 38% Japan 55 38 45% 174 100 74%
Emerging Markets 191 192 -1% 892 818 9% Global Brand Divisions3
(722) (627) -15%
(2,596) (2,267) -15%
TOTAL NIKE
BRAND 1,171 1,277
-8% 5,328
4,813 11% Converse 128 80 60% 487 517 -6%
Corporate4 (221) (301) 27%
(1,173) (1,097) -7%
TOTAL EARNINGS BEFORE INTEREST AND TAXES
1,078 1,056 2%
4,642 4,233
10% Interest expense (income), net 5
4 — 19 28 —
TOTAL INCOME BEFORE INCOME TAXES $
1,073 $ 1,052 2%
$ 4,623 $ 4,205
10% 1 The Company evaluates performance of individual
operating segments based on earnings before interest and taxes
(commonly referred to as “EBIT”), which represents net income
before interest expense (income), net and income tax expense.
2 Certain prior year amounts have been
reclassified to conform to fiscal 2016 presentation. These changes
had no impact on previously reported results of operations or
shareholders' equity.
3 Global Brand Divisions primarily
represent demand creation, operating overhead and product creation
and design expenses that are centrally managed for the NIKE Brand.
Revenues for Global Brand Divisions are primarily attributable to
NIKE Brand licensing businesses that are not part of a geographic
operating segment.
4 Corporate consists largely of
unallocated general and administrative expenses, including expenses
associated with centrally managed departments; depreciation and
amortization related to the Company’s corporate headquarters;
unallocated insurance, benefit and compensation programs, including
stock-based compensation; and certain foreign currency gains and
losses, including certain hedge gains and losses.
NIKE, Inc. NIKE BRAND
REPORTED FUTURES GROWTH BY GEOGRAPHY1 As of May 31, 2016
Reported Futures
Excluding Currency
Orders
Changes2
North America 6% 6% Western Europe 8% 11% Central & Eastern
Europe 3% 7% Greater China 19% 24% Japan 24% 15% Emerging Markets
3% 13%
Total NIKE Brand Reported
Futures 8% 11% 1 Futures orders for
NIKE Brand footwear and apparel scheduled for delivery from June
2016 through November 2016. NIKE Brand reported futures include (1)
orders from external wholesale customers and (2) internal orders
from our DTC in-line stores and e-commerce operations which are
reflected at prices that are comparable to prices charged to
external wholesale customers. The U.S. Dollar futures orders amount
is calculated based upon our internal forecast of the currency
exchange rates under which our revenues will be translated during
this period. The reported futures orders growth is not
necessarily indicative of our expectation of revenue growth during
this period. This is due to year-over-year changes in shipment
timing, changes in the mix of orders between futures and at-once
orders, and because the fulfillment of certain orders may fall
outside of the schedule noted above. In addition, exchange rate
fluctuations as well as differing levels of order cancellations,
discounts and returns can cause differences in the comparisons
between futures orders and actual revenues. Moreover, a portion of
our revenue is not derived from futures orders, including sales of
at-once and closeout NIKE Brand footwear and apparel, all sales of
NIKE Brand equipment, the difference between retail sales and
internal orders from our DTC in-line stores and e-commerce
operations, and sales from Converse, NIKE Golf and Hurley. 2
Reported futures have been restated using prior year exchange rates
for the comparative period to enhance the visibility of the
underlying business trends, excluding the impact of foreign
currency exchange rate fluctuations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160628006580/en/
NIKE, Inc.Investor Contact:Nitesh
Sharan, 503-532-2828orMedia
Contact:Kellie Leonard, 503-671-6171
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