NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2020 fourth quarter and full year ended May 31, 2020.
Our fourth quarter results were significantly impacted by physical store closures across North America, EMEA and APLA, where 90 percent of NIKE-owned stores were closed for roughly eight weeks in the quarter to protect the health and safety of teammates and consumers and help slow the spread of the COVID-19 pandemic. Our wholesale partners largely followed the same pattern and as a result, product shipments to wholesale customers were down nearly 50 percent resulting in lower total revenue and higher inventory. During the widespread physical store closures, we accelerated our connection and engagement with our consumers leveraging the strength of our digital ecosystem.
“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” said John Donahoe, President and Chief Executive Officer, NIKE, Inc. “We are uniquely positioned to grow, and now is the time to build on NIKE's strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”**
COVID-19 Update on Operations
As of today, approximately 90 percent of NIKE-owned stores are open across the globe. Retail traffic continues to improve week-over-week with higher conversion rates as compared to the prior year.**
In Greater China, nearly 100 percent of NIKE-owned stores are open.
In North America, EMEA and APLA, approximately 90 percent of physical owned stores were closed during the fourth quarter with stores gradually reopening at different paces in each country beginning in mid-May. Today, roughly 85 percent of NIKE-owned stores are open in North America and about 90 percent in EMEA, with approximately 65 percent open in APLA or operating under reduced hours.
“As physical retail re-opens, NIKE's strong digital trends continue, a testament to the strength of our brand and the investments we've made to elevate digital consumer experiences,” said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. “Amid macroeconomic uncertainty, we will continue to operate with agility, focused on optimizing marketplace supply and demand, cost management and leveraging our financial strength to drive long-term sustainable, profitable growth.”**
As we continue to reopen retail stores and increase distribution center activity, we remain focused on prioritizing the health of our teammates and consumers and have taken proactive steps to help ensure a safe environment. During the quarter, we made significant investments to provide employee pay continuity and committed over $25 million to support communities impacted by COVID-19 among other COVID-19 response efforts.
Fourth Quarter Income Statement Review
Fiscal 2020 Income Statement Review
May 31, 2020 Balance Sheet Review
Shareholder Returns
NIKE has a strong track record of investing to fuel growth and consistently increasing returns to shareholders through dividends and share repurchases including 18 consecutive years of increasing dividend payouts. In fiscal 2020, the Company returned $4.5 billion to shareholders, including:
During the fourth quarter, NIKE, Inc. repurchased 1.9 million shares for approximately $159 million before suspending share repurchase activity in March to maximize liquidity in the current dynamic environment.
As of May 31, 2020, a total of 45.2 million shares had been repurchased for approximately $4.0 billion, resulting in approximately $11 billion in remaining capacity under the 2018 share repurchase program.
Conference Call
NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on June 25, 2020, 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, 2020.
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. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic 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 or the Supplemental NIKE Brand Revenue 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. |
NIKE, Inc. |
||||||||||||
CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||
(Unaudited) |
||||||||||||
|
||||||||||||
|
|
|
|
|
|
|
||||||
|
THREE MONTHS ENDED |
% |
TWELVE MONTHS ENDED |
% |
||||||||
(In millions, except per share data) | 5/31/2020 |
5/31/2019 |
Change |
5/31/2020 |
5/31/2019 |
Change |
||||||
Revenues | $ 6,313 |
|
$ 10,184 |
|
-38 |
% |
$ 37,403 |
|
$ 39,117 |
|
-4 |
% |
Cost of sales | 3,960 |
|
5,551 |
|
-29 |
% |
21,162 |
|
21,643 |
|
-2 |
% |
Gross profit | 2,353 |
|
4,633 |
|
-49 |
% |
16,241 |
|
17,474 |
|
-7 |
% |
Gross margin | 37.3 |
% |
45.5 |
% |
43.4 |
% |
44.7 |
% |
||||
Demand creation expense | 823 |
|
1,014 |
|
-19 |
% |
3,592 |
|
3,753 |
|
-4 |
% |
Operating overhead expense | 2,368 |
|
2,392 |
|
-1 |
% |
9,534 |
|
8,949 |
|
7 |
% |
Total selling and administrative expense | 3,191 |
|
3,406 |
|
-6 |
% |
13,126 |
|
12,702 |
|
3 |
% |
% of revenues | 50.5 |
% |
33.4 |
% |
35.1 |
% |
32.5 |
% |
||||
Interest expense (income), net | 50 |
|
12 |
|
— |
|
89 |
|
49 |
|
— |
|
Other (income) expense, net | (84 |
) |
(28 |
) |
— |
|
139 |
|
(78 |
) |
— |
|
(Loss) income before income taxes | (804 |
) |
1,243 |
|
-165 |
% |
2,887 |
|
4,801 |
|
-40 |
% |
Income tax (benefit) expense | (14 |
) |
254 |
|
-106 |
% |
348 |
|
772 |
|
-55 |
% |
Effective tax rate | 1.7 |
% |
20.4 |
% |
12.1 |
% |
16.1 |
% |
||||
NET (LOSS) INCOME | $ (790 |
) |
$ 989 |
|
-180 |
% |
$ 2,539 |
|
$ 4,029 |
|
-37 |
% |
(Loss) earnings per common share: | ||||||||||||
Basic | $ (0.51 |
) |
$ 0.63 |
|
-181 |
% |
$ 1.63 |
|
$ 2.55 |
|
-36 |
% |
Diluted | $ (0.51 |
) |
$ 0.62 |
|
-182 |
% |
$ 1.60 |
|
$ 2.49 |
|
-36 |
% |
Weighted average common shares outstanding: | ||||||||||||
Basic | 1,555.7 |
|
1,570.2 |
|
1,558.8 |
|
1,579.7 |
|
||||
Diluted | 1,555.7 |
|
1,607.5 |
|
1,591.6 |
|
1,618.4 |
|
||||
Dividends declared per common share | $ 0.245 |
|
$ 0.22 |
|
$ 0.955 |
|
$ 0.86 |
|
NIKE, Inc. |
||||
CONSOLIDATED BALANCE SHEETS |
||||
(Unaudited) |
||||
|
||||
|
May 31, |
May 31, |
% Change |
|
(Dollars in millions) |
2020 |
2019 |
||
ASSETS | ||||
Current assets: | ||||
Cash and equivalents | $ 8,348 |
$ 4,466 |
87 |
% |
Short-term investments | 439 |
197 |
123 |
% |
Accounts receivable, net | 2,749 |
4,272 |
-36 |
% |
Inventories | 7,367 |
5,622 |
31 |
% |
Prepaid expenses and other current assets | 1,653 |
1,968 |
-16 |
% |
Total current assets | 20,556 |
16,525 |
24 |
% |
Property, plant and equipment, net | 4,866 |
4,744 |
3 |
% |
Operating lease right-of-use assets, net | 3,097 |
— |
— |
|
Identifiable intangible assets, net | 274 |
283 |
-3 |
% |
Goodwill | 223 |
154 |
45 |
% |
Deferred income taxes and other assets | 2,326 |
2,011 |
16 |
% |
TOTAL ASSETS | $ 31,342 |
$ 23,717 |
32 |
% |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current liabilities: | ||||
Current portion of long-term debt | $ 3 |
$ 6 |
-50 |
% |
Notes payable | 248 |
9 |
2,656 |
% |
Accounts payable | 2,248 |
2,612 |
-14 |
% |
Current portion of operating lease liabilities | 445 |
— |
— |
|
Accrued liabilities | 5,184 |
5,010 |
3 |
% |
Income taxes payable | 156 |
229 |
-32 |
% |
Total current liabilities | 8,284 |
7,866 |
5 |
% |
Long-term debt | 9,406 |
3,464 |
172 |
% |
Operating lease liabilities | 2,913 |
— |
— |
|
Deferred income taxes and other liabilities | 2,684 |
3,347 |
-20 |
% |
Redeemable preferred stock | — |
— |
— |
|
Shareholders' equity | 8,055 |
9,040 |
-11 |
% |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 31,342 |
$ 23,717 |
32 |
% |
NIKE, Inc. |
||||||||||||||||
DIVISIONAL REVENUES |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
|
|
|
% Change
|
|
|
|
% Change
|
||||||||
|
|
|
|
|
|
|
||||||||||
|
THREE MONTHS ENDED |
% |
TWELVE MONTHS ENDED |
% |
||||||||||||
(Dollars in millions) |
5/31/2020 |
5/31/2019 |
Change |
5/31/2020 |
5/31/2019 |
Change |
||||||||||
North America | ||||||||||||||||
Footwear | $ 1,606 |
|
$ 2,736 |
|
-41 |
% |
-41 |
% |
$ 9,329 |
|
$ 10,045 |
|
-7 |
% |
-7 |
% |
Apparel | 563 |
|
1,275 |
|
-56 |
% |
-56 |
% |
4,639 |
|
5,260 |
|
-12 |
% |
-12 |
% |
Equipment | 61 |
|
154 |
|
-60 |
% |
-60 |
% |
516 |
|
597 |
|
-14 |
% |
-14 |
% |
Total | 2,230 |
|
4,165 |
|
-46 |
% |
-46 |
% |
14,484 |
|
15,902 |
|
-9 |
% |
-9 |
% |
Europe, Middle East & Africa | ||||||||||||||||
Footwear | 887 |
|
1,643 |
|
-46 |
% |
-44 |
% |
5,892 |
|
6,293 |
|
-6 |
% |
-3 |
% |
Apparel | 398 |
|
713 |
|
-44 |
% |
-42 |
% |
3,053 |
|
3,087 |
|
-1 |
% |
2 |
% |
Equipment | 43 |
|
101 |
|
-57 |
% |
-55 |
% |
402 |
|
432 |
|
-7 |
% |
-3 |
% |
Total | 1,328 |
|
2,457 |
|
-46 |
% |
-44 |
% |
9,347 |
|
9,812 |
|
-5 |
% |
-1 |
% |
Greater China | ||||||||||||||||
Footwear | 1,149 |
|
1,167 |
|
-2 |
% |
3 |
% |
4,635 |
|
4,262 |
|
9 |
% |
12 |
% |
Apparel | 468 |
|
494 |
|
-5 |
% |
-1 |
% |
1,896 |
|
1,808 |
|
5 |
% |
8 |
% |
Equipment | 30 |
|
36 |
|
-17 |
% |
-9 |
% |
148 |
|
138 |
|
7 |
% |
11 |
% |
Total | 1,647 |
|
1,697 |
|
-3 |
% |
1 |
% |
6,679 |
|
6,208 |
|
8 |
% |
11 |
% |
Asia Pacific & Latin America | ||||||||||||||||
Footwear | 559 |
|
953 |
|
-41 |
% |
-38 |
% |
3,449 |
|
3,622 |
|
-5 |
% |
0 |
% |
Apparel | 211 |
|
363 |
|
-42 |
% |
-38 |
% |
1,365 |
|
1,395 |
|
-2 |
% |
3 |
% |
Equipment | 31 |
|
63 |
|
-51 |
% |
-47 |
% |
214 |
|
237 |
|
-10 |
% |
-4 |
% |
Total | 801 |
|
1,379 |
|
-42 |
% |
-39 |
% |
5,028 |
|
5,254 |
|
-4 |
% |
1 |
% |
Global Brand Divisions2 | 6 |
|
9 |
|
-33 |
% |
-27 |
% |
30 |
|
42 |
|
-29 |
% |
-26 |
% |
TOTAL NIKE BRAND | 6,012 |
|
9,707 |
|
-38 |
% |
-36 |
% |
35,568 |
|
37,218 |
|
-4 |
% |
-2 |
% |
Converse | 305 |
|
491 |
|
-38 |
% |
-36 |
% |
1,846 |
|
1,906 |
|
-3 |
% |
-1 |
% |
Corporate3 | (4 |
) |
(14 |
) |
— |
|
— |
|
(11 |
) |
(7 |
) |
— |
|
— |
|
TOTAL NIKE, INC. REVENUES | $ 6,313 |
|
$ 10,184 |
|
-38 |
% |
-36 |
% |
$ 37,403 |
|
$ 39,117 |
|
-4 |
% |
-2 |
% |
TOTAL NIKE BRAND | ||||||||||||||||
Footwear | $ 4,201 |
|
$ 6,499 |
|
-35 |
% |
-34 |
% |
$ 23,305 |
|
$ 24,222 |
|
-4 |
% |
-2 |
% |
Apparel | 1,640 |
|
2,845 |
|
-42 |
% |
-41 |
% |
10,953 |
|
11,550 |
|
-5 |
% |
-3 |
% |
Equipment | 165 |
|
354 |
|
-53 |
% |
-51 |
% |
1,280 |
|
1,404 |
|
-9 |
% |
-6 |
% |
Global Brand Divisions2 | 6 |
|
9 |
|
-33 |
% |
-27 |
% |
30 |
|
42 |
|
-29 |
% |
-26 |
% |
TOTAL NIKE BRAND REVENUES | $ 6,012 |
|
$ 9,707 |
|
-38 |
% |
-36 |
% |
$ 35,568 |
|
$ 37,218 |
|
-4 |
% |
-2 |
% |
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. | ||||||||||||||||
2 Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment. | ||||||||||||||||
3 Corporate revenues consist primarily 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 the Company's central foreign exchange risk management program. |
NIKE, Inc. |
||||||
SUPPLEMENTAL NIKE BRAND REVENUE DETAILS |
||||||
(Unaudited) |
||||||
|
|
|
|
% Change
|
||
|
|
|
|
|||
|
TWELVE MONTHS ENDED |
% Change |
||||
(Dollars in millions) |
5/31/2020 |
5/31/2019 |
||||
NIKE Brand Revenues by: | ||||||
Sales to Wholesale Customers | $ 23,156 |
$ 25,423 |
-9 |
% |
-7 |
% |
Sales through NIKE Direct | 12,382 |
11,753 |
5 |
% |
8 |
% |
Global Brand Divisions2 | 30 |
42 |
-29 |
% |
-26 |
% |
TOTAL NIKE BRAND REVENUES | $ 35,568 |
$ 37,218 |
-4 |
% |
-2 |
% |
NIKE Brand Revenues on a Wholesale Equivalent Basis:3 | ||||||
Sales to Wholesale Customers | $ 23,156 |
$ 25,423 |
-9 |
% |
-7 |
% |
Sales from our Wholesale Operations to NIKE Direct Operations | 7,452 |
7,127 |
5 |
% |
7 |
% |
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES | $ 30,608 |
$ 32,550 |
-6 |
% |
-4 |
% |
NIKE Brand Wholesale Equivalent Revenues by:3 | ||||||
Men’s | $ 16,694 |
$ 17,737 |
-6 |
% |
-4 |
% |
Women’s | 6,999 |
7,380 |
-5 |
% |
-3 |
% |
NIKE Kids’ | 5,033 |
5,283 |
-5 |
% |
-3 |
% |
Others4 | 1,882 |
2,150 |
-12 |
% |
-10 |
% |
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES | $ 30,608 |
$ 32,550 |
-6 |
% |
-4 |
% |
NIKE Brand Wholesale Equivalent Revenues by:3 | ||||||
Running | $ 3,830 |
$ 4,488 |
-15 |
% |
-12 |
% |
NIKE Basketball | 1,508 |
1,597 |
-6 |
% |
-4 |
% |
Jordan Brand | 3,609 |
3,138 |
15 |
% |
16 |
% |
Football (Soccer) | 1,575 |
1,894 |
-17 |
% |
-14 |
% |
Training | 2,688 |
3,137 |
-14 |
% |
-13 |
% |
Sportswear | 12,285 |
12,442 |
-1 |
% |
1 |
% |
Others5 | 5,113 |
5,854 |
-13 |
% |
-10 |
% |
TOTAL NIKE BRAND WHOLESALE EQUIVALENT REVENUES | $ 30,608 |
$ 32,550 |
-6 |
% |
-4 |
% |
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. | ||||||
2 Global Brand Divisions revenues are primarily attributable to NIKE Brand licensing businesses that are not part of a geographic operating segment. | ||||||
3 References to NIKE Brand wholesale equivalent revenues, which are considered non-GAAP financial measures, are intended to provide context as to the total size of the Company’s NIKE Brand market footprint if it had no NIKE Direct operations. NIKE Brand wholesale equivalent revenues consist of 1) sales to external wholesale customers and 2) internal sales from the Company’s wholesale operations to its NIKE Direct operations which are charged at prices comparable to those charged to external wholesale customers. | ||||||
4 Others include all unisex products, equipment and other products not allocated to Men’s, Women’s and NIKE Kids’, as well as certain adjustments that are not allocated to products designated by gender or age. | ||||||
5 Others include all other categories and certain adjustments that are not allocated at the category level. |
NIKE, Inc. |
||||||||||||
EARNINGS BEFORE INTEREST AND TAXES1 |
||||||||||||
(Unaudited) |
||||||||||||
|
||||||||||||
|
|
|
|
|
||||||||
|
THREE MONTHS ENDED |
% |
TWELVE MONTHS ENDED |
% |
||||||||
(Dollars in millions) |
5/31/2020 |
5/31/2019 |
Change |
5/31/2020 |
5/31/2019 |
Change |
||||||
North America | $ (13 |
) |
$ 1,048 |
|
-101 |
% |
$ 2,899 |
|
$ 3,925 |
|
-26 |
% |
Europe, Middle East & Africa | (153 |
) |
506 |
|
-130 |
% |
1,541 |
|
1,995 |
|
-23 |
% |
Greater China | 571 |
|
674 |
|
-15 |
% |
2,490 |
|
2,376 |
|
5 |
% |
Asia Pacific & Latin America | 79 |
|
340 |
|
-77 |
% |
1,184 |
|
1,323 |
|
-11 |
% |
Global Brand Divisions2 | (844 |
) |
(830 |
) |
-2 |
% |
(3,468 |
) |
(3,262 |
) |
-6 |
% |
TOTAL NIKE BRAND1 | (360 |
) |
1,738 |
|
-121 |
% |
4,646 |
|
6,357 |
|
-27 |
% |
Converse | (27 |
) |
82 |
|
-133 |
% |
297 |
|
303 |
|
-2 |
% |
Corporate3 | (367 |
) |
(565 |
) |
35 |
% |
(1,967 |
) |
(1,810 |
) |
-9 |
% |
TOTAL NIKE, INC. (LOSS) EARNINGS BEFORE INTEREST AND TAXES1 | (754 |
) |
1,255 |
|
-160 |
% |
2,976 |
|
4,850 |
|
-39 |
% |
Interest expense (income), net | 50 |
|
12 |
|
— |
|
89 |
|
49 |
|
— |
|
TOTAL NIKE, INC. (LOSS) INCOME BEFORE INCOME TAXES | $ (804 |
) |
$ 1,243 |
|
-165 |
% |
$ 2,887 |
|
$ 4,801 |
|
-40 |
% |
1 The Company evaluates the 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. Total NIKE Brand EBIT and Total NIKE, Inc. EBIT are considered non-GAAP financial measures and are being provided as management believes this additional information should be considered when assessing the Company's underlying business performance and trends. References to EBIT should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies. | ||||||||||||
2 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. | ||||||||||||
3 Corporate consists primarily 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. Corporate includes the non-recurring charge, recognized in fiscal 2020, as a result of the Company’s decision to transition its operations in Brazil, Argentina, Chile and Uruguay to third-party distributors. This charge primarily reflects the anticipated release of associated non-cash cumulative foreign currency translation losses. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200625005876/en/
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