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Published: 2020-12-18 16:16:50 ET
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EX-99.1 2 q2fy21exhibit991er.htm EX-99.1 Document

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Investor Contact:Media Contact:
Andy MuirKeJuan Wilkins
(971) 473-3143(971) 473-2556
NIKE, INC. REPORTS FISCAL 2021 SECOND QUARTER RESULTS


BEAVERTON, Ore., Dec. 18, 2020 — NIKE, Inc. (NYSE:NKE) today reported fiscal 2021 financial results for its second quarter ended November 30, 2020.

•Second quarter reported revenues were $11.2 billion, up 9 percent compared to prior year and up 7 percent on a currency-neutral basis* driven by growth across all geographies, led by Greater China reported revenue growth of 24 percent
•NIKE Direct sales were $4.3 billion, up 32 percent on a reported basis, and up 30 percent on a currency-neutral basis, with double-digit growth across all geographies
•NIKE Brand digital sales increased 84 percent, or 80 percent on a currency-neutral basis, with triple-digit growth in North America and strong double-digit increases in EMEA, Greater China and APLA
•Diluted earnings per share for the quarter was $0.78, up 11 percent
•Inventories declined 2 percent versus prior year and have returned to healthy levels globally

“NIKE’s strong results during a dynamic environment show the power of staying on the offense,” said John Donahoe, President and CEO, NIKE, Inc. “Fueled by compelling innovative product and global brand momentum, we continue to extend our leadership. Our strategy is working, and we are excited for what’s ahead.”**

Our second quarter revenue performance was impacted by strong NIKE Brand digital growth of 84 percent, offset by lower revenue in our wholesale business and NIKE-owned stores. During the quarter, we experienced temporary door closures in geographies affected by rising COVID-19 cases; however, more than 90% of our owned stores are open today, with some operating on reduced hours. We continue to experience year-over-year declines in physical retail traffic in North America, EMEA and APLA due to COVID-19 impacts and safety-related measures, partially offset by higher conversion rates.

“With healthy inventory positions across all geographies, our return to growth is a testament to our digital strength, as well as our disciplined marketplace and financial management,” said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. “As we look ahead, we are focused on moving even faster against our strategic vision of Consumer Direct Acceleration and fueling sustainable, long-term growth and profitability.”**

Second Quarter Income Statement Review

•Revenues for NIKE, Inc. increased 9 percent to $11.2 billion compared to the prior year, up 7 percent on a currency-neutral basis.
◦Revenues for the NIKE Brand were $10.7 billion, an increase of 8 percent to prior year on a currency-neutral basis driven by strong double-digit growth in NIKE Direct, as well as growth in Sportswear and the Jordan Brand, slightly offset by mid single-digit declines in our wholesale business.
◦Revenues for Converse were $476 million, down 4 percent on a currency-neutral basis, as double-digit growth in digital and growth in Asia were more than offset by declines in Europe and North America primarily due to tighter supply and strategic distribution shifts.
•Gross margin decreased 90 basis points to 43.1 percent, primarily driven by higher promotional activity to reduce excess inventory resulting from COVID-19 impacts and restructuring-related costs for the previously announced reorganization, both partially offset by favorable full-price product margins.
•Selling and administrative expense decreased 2 percent to $3.3 billion.
◦Demand creation expense was $729 million, down 17 percent due primarily to lower marketing spend on brand and sports events as a result of COVID-19, slightly offset by continued investments in digital marketing to support higher digital demand.
◦Operating overhead expense increased 4 percent to $2.5 billion primarily due to approximately $135 million of restructuring-related costs and continued investments in digital capabilities to support the Consumer Direct Acceleration strategy. These costs were slightly offset by disciplined expense management.
•The effective tax rate was 14.1 percent compared to 10.7 percent for the same period last year, primarily due to changes in earnings mix and an increase in tax associated with recently finalized U.S. tax regulations. This increase was offset, in part, by a more favorable impact from stock-based compensation.
•Net income was $1.3 billion, up 12 percent driven by strong revenue growth and lower selling and administrative expense, slightly offset by lower gross margin.
•Diluted earnings per share was $0.78, increasing 11 percent as weighted average common shares outstanding increased slightly.

November 30, 2020 Balance Sheet Review

•Inventories for NIKE, Inc. were $6.1 billion, down 2 percent compared to the prior year period, returning to healthy levels globally.
•Cash and equivalents and short-term investments were $11.8 billion, $8.3 billion higher than last year primarily due to proceeds from a corporate bond issuance in March and positive free cash flow, partially offset by cash dividends and share repurchases. Total liquidity as of November 30th was $15.8 billion which includes cash and equivalents, short-term investments and committed credit facilities which remain undrawn.

Shareholder Returns

NIKE continues a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 19 consecutive years of increasing dividend payouts. In the second quarter, the Company paid dividends of $385 million to shareholders, up 12 percent from the prior year.

During its FY20 fourth quarter, NIKE, Inc. temporarily suspended share repurchase activity in March to maximize liquidity during the COVID-19 pandemic. Prior to the temporary suspension of the share repurchase program, a total of 45.2 million shares had been repurchased for approximately $4.0 billion, resulting in approximately $11.0 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 December 18, 2020, to review fiscal second quarter results. The conference call will be broadcast live via 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, January 8, 2021.

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 regarding this non-GAAP financial measure.
**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 U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

(Tables Follow)


NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED%SIX MONTHS ENDED%
(In millions, except per share data)11/30/202011/30/2019Change11/30/202011/30/2019Change
Revenues$11,243 $10,326 9 %$21,837 $20,986 4 %
Cost of sales6,396 5,782 11 %12,249 11,571 6 %
Gross profit4,847 4,544 7 %9,588 9,415 2 %
Gross margin43.1 %44.0 %43.9 %44.9 %
Demand creation expense729 881 -17 %1,406 1,899 -26 %
Operating overhead expense2,538 2,443 4 %4,836 4,753 2 %
Total selling and administrative expense3,267 3,324 -2 %6,242 6,652 -6 %
% of revenues29.1 %32.2 %28.6 %31.7 %
Interest expense (income), net70 12 — 135 27 — 
Other (income) expense, net54 (41)— 40 (74)— 
Income before income taxes1,456 1,249 17 %3,171 2,810 13 %
Income tax expense205 134 53 %402 328 23 %
Effective tax rate14.1 %10.7 %12.7 %11.7 %
NET INCOME$1,251 $1,115 12 %$2,769 $2,482 12 %
Earnings per common share:
Basic$0.80 $0.71 13 %$1.77 $1.59 11 %
Diluted$0.78 $0.70 11 %$1.73 $1.56 11 %
Weighted average common shares outstanding:
Basic1,573.0 1,560.6 1,567.4 1,561.5 
Diluted1,609.5 1,594.4 1,601.9 1,596.0 
Dividends declared per common share$0.275 $0.245 $0.520 $0.465 


NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 30, November 30,% Change
(Dollars in millions)20202019
ASSETS
Current assets:
Cash and equivalents$8,635 $3,070 181 %
Short-term investments3,177 432 635 %
Accounts receivable, net3,713 4,792 -23 %
Inventories6,090 6,199 -2 %
Prepaid expenses and other current assets1,992 1,876 6 %
Total current assets23,607 16,369 44 %
Property, plant and equipment, net4,959 4,668 6 %
Operating lease right-of-use assets, net3,086 2,882 7 %
Identifiable intangible assets, net270 277 -3 %
Goodwill223 224 0 %
Deferred income taxes and other assets2,691 2,182 23 %
TOTAL ASSETS$34,836 $26,602 31 %
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$— $6 -100 %
Notes payable41 300 -86 %
Accounts payable2,154 2,627 -18 %
Current portion of operating lease liabilities458 431 6 %
Accrued liabilities6,030 4,672 29 %
Income taxes payable188 228 -18 %
Total current liabilities8,871 8,264 7 %
Long-term debt9,410 3,462 172 %
Operating lease liabilities2,896 2,723 6 %
Deferred income taxes and other liabilities3,019 2,802 8 %
Redeemable preferred stock— — — 
Shareholders’ equity10,640 9,351 14 %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$34,836 $26,602 31 %


NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
% Change Excluding Currency Changes1
% Change Excluding Currency Changes1
THREE MONTHS ENDED%SIX MONTHS ENDED%
(Dollars in millions)11/30/202011/30/2019Change11/30/202011/30/2019Change
North America
Footwear$2,512 $2,426 4 %4 %$5,469 $5,095 7 %7 %
Apparel1,368 1,417 -3 %-3 %2,493 2,848 -12 %-12 %
Equipment126 139 -9 %-10 %269 332 -19 %-19 %
Total4,006 3,982 1 %1 %8,231 8,275 -1 %0 %
Europe, Middle East & Africa
Footwear1,731 1,536 13 %8 %3,533 3,294 7 %5 %
Apparel1,104 897 23 %18 %2,075 1,766 17 %15 %
Equipment123 104 18 %16 %260 250 4 %3 %
Total2,958 2,537 17 %12 %5,868 5,310 11 %8 %
Greater China
Footwear1,567 1,247 26 %20 %2,818 2,411 17 %15 %
Apparel681 563 21 %16 %1,159 1,028 13 %11 %
Equipment50 37 35 %29 %101 87 16 %14 %
Total2,298 1,847 24 %19 %4,078 3,526 16 %14 %
Asia Pacific & Latin America
Footwear991 997 -1 %5 %1,749 1,927 -9 %-3 %
Apparel432 410 5 %9 %733 766 -4 %0 %
Equipment48 61 -21 %-17 %88 120 -27 %-22 %
Total1,471 1,468 0 %5 %2,570 2,813 -9 %-3 %
Global Brand Divisions2
8 10 -20 %-20 %12 16 -25 %-25 %
TOTAL NIKE BRAND10,741 9,844 9 %8 %20,759 19,940 4 %4 %
Converse476 480 -1 %-4 %1,039 1,035 0 %-1 %
Corporate3
26 2 — — 39 11 — — 
TOTAL NIKE, INC. REVENUES$11,243 $10,326 9 %7 %$21,837 $20,986 4 %4 %
TOTAL NIKE BRAND
Footwear$6,801 $6,206 10 %8 %$13,569 $12,727 7 %7 %
Apparel3,585 3,287 9 %7 %6,460 6,408 1 %0 %
Equipment347 341 2 %1 %718 789 -9 %-9 %
Global Brand Divisions2
8 10 -20 %-20 %12 16 -25 %-25 %
TOTAL NIKE BRAND REVENUES$10,741 $9,844 9 %8 %$20,759 $19,940 4 %4 %
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period and is provided 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. Management uses this non-GAAP financial measure when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing the Company’s underlying business performance and trends. References to this measure 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 revenues include NIKE Brand licensing revenues as well as other miscellaneous revenues 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.
EARNINGS BEFORE INTEREST AND TAXES1
(Unaudited)
THREE MONTHS ENDED%SIX MONTHS ENDED%
(Dollars in millions)11/30/202011/30/2019Change11/30/202011/30/2019Change
North America$1,023 $875 17 %$2,325 $1,975 18 %
Europe, Middle East & Africa660 510 29 %1,352 1,119 21 %
Greater China891 694 28 %1,579 1,363 16 %
Asia Pacific & Latin America424 377 12 %704 718 -2 %
Global Brand Divisions2
(841)(872)4 %(1,694)(1,729)2 %
TOTAL NIKE BRAND1
2,157 1,584 36 %4,266 3,446 24 %
Converse87 90 -3 %255 228 12 %
Corporate3
(718)(413)-74 %(1,215)(837)-45 %
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1
1,526 1,261 21 %3,306 2,837 17 %
Interest expense (income), net70 12 — 135 27 — 
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES$1,456 $1,249 17 %$3,171 $2,810 13 %
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 consists primarily of demand creation, operating overhead and product creation and design expenses that are centrally managed for the NIKE Brand. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues 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. For the three and six months ended November 30, 2020, Corporate included non-recurring employee termination and related costs associated with the previously announced leadership and operating model changes.