In late December, NIKE reported financial results for its fiscal 2017 second quarter ended 30 November 2016. Building on a strong fiscal first quarter, the sportswear giant noted that global consumer demand drove revenue growth across the NIKE Brand portfolio in Q2 2017. Diluted earnings per share were up 11% and grew faster than revenue, primarily due to ‘selling and administrative expense leverage and a lower average share count’.
“NIKE’s ability to attack the opportunities that consistently drive growth over the near and long term is what sets us apart,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “With industry-defining innovation platforms, highly anticipated signature basketball styles and more personalized retail experiences on the horizon, we are well-positioned to carry our momentum into the back half of the fiscal year and beyond.”
- In fiscal Q2, revenues for NIKE overall increased 6% to US$8.2 billion, up 8% on a currency neutral basis.
- Revenues for the NIKE Brand were US$7.7 billion, up 8% on a constant currency basis, driven by double-digit currency neutral growth in Western Europe, Greater China and the Emerging Markets as well as the Sportswear and Running categories.
- (Revenues for Converse were US$416 million, up 5% on a currency neutral basis, driven by strong growth in North America.)
- Gross margin contracted 140 basis points to 44.2%, as higher average selling prices were more than offset by higher product costs, unfavourable changes in foreign exchange rates and the impact of higher off-price sales.
- Selling and administrative expense declined 2% to US$2.5 billion. The company cited demand creation expenses of US$762 million, relatively unchanged from the prior year. Operating overhead expense decreased 3% to US$1.7 billion, as continued investments in Direct-to-Consumer (DTC) were offset by productivity gains compared to the prior year.
- Other income, net was US$18 million comprised primarily of non-operating items, and to a lesser extent, net foreign exchange gains.
Inventories for NIKE were US$5.0 billion, up 9% from 30 November 2015, due to a 1% increase in ‘NIKE Brand wholesale unit inventories and increases in average product costs per unit primarily due to product mix, as well as higher inventories associated with growth in DTC’.
Cash and short-term investments were US$5.9 billion, US$173 million lower than 30 November 2015 as growth in net income and proceeds from the issuance of debt in the second quarter of fiscal 2017 were more than offset by share repurchases, higher dividends, investments in infrastructure and a reduction in collateral received from counterparties to foreign currency hedging instruments.
During the fiscal second quarter, NIKE repurchased a total of 17.0 million shares for approximately US$900 million as part of the four-year, US$12 billion program approved by the Board of Directors in November 2015. As of 30 November 2016, a total of 56.0 million shares had been repurchased under this program for approximately US$3.1 billion.