Nike’s Q1 Profits Increase 9%, Futures Climb 10%

“We had a great first quarter” said Mark Parker, President and CEO, NIKE, Inc. “Going forward we'll continue to maximize the flexibility, balance and alignment that we have built into our portfolio of brands and categories. Those strengths will help us navigate the continued uncertainty in the macro-economic picture. More importantly they help us leverage the global appetite for sports and innovation, which has never been stronger. That's how we continue to grow our businesses, strengthen our balance sheet and increase our returns to shareholders over the long term.”

Futures Orders

As of the end of the quarter worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from September 2010 through January 2011, totaled $7.1 billion, 10% higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 13%.*

By geography, futures orders were as follows:

Revenues increased 8% to $5.2 billion. Excluding the impacts of changes in foreign currency, NIKE, Inc. revenue increased 10%. Revenues for the NIKE Brand were up 8% on a currency neutral basis driven by growth in each of the seven NIKE Brand categories: Action Sports, Athletic Training, Basketball, Football (Soccer), Running, Sportswear and Women's Training. Excluding currency changes, revenues for our Other Businesses increased 16% as Cole Haan, Converse, Hurley, NIKE Golf and Umbro all experienced growth during the quarter.

Gross margins improved 80 basis points to 47.0% due to growth and improved profitability from Direct to Consumer operations, fewer and more profitable close-out sales and improved in-line product margins. These factors more than offset margin pressures resulting from changes in foreign currency and higher airfreight costs to meet strong demand for NIKE Brand products.

Selling and administrative expenses were up 8% to $1.7 billion due to planned investments in demand creation spending, which increased 23% to $679 million primarily as a result of marketing expenses incurred for the World Cup and World Basketball Festival. Operating overhead spending was $994 million, in line with last year, as investments in our Direct to Consumer business and key brand events were offset by changes in stock-based compensation expense.

Other expense was $7 million, comprised largely of non-recurring items which offset net conversion gains primarily on currency hedges. For the quarter, we estimate the year-over-year change in foreign currency related gains included in other expense (income), net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits decreased pretax income by approximately $33 million.

The effective tax rate was 26.0% compared to 24.7% for the same period last year primarily because a larger%age of pretax income related to operations in the United States, which has a higher effective tax rate than operations abroad.

Net income increased 9% to $559 million and diluted earnings per share increased 10% to $1.14 reflecting an approximate 1% decline in the number of diluted weighted average common shares outstanding.

August 31, 2010 Balance Sheet Review

Inventories for NIKE, Inc. were $2.2 billion, down 3% from August 31, 2009.

Cash and short-term investments at period-end were $4.7 billion, 29% higher than last year mainly as a result of higher net income and continued focus on working capital management.

Share Repurchases

During the first quarter, the company repurchased a total of 7.3 million shares for approximately $517 million as part of the company's four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the first quarter the company has purchased a total of 13.9 million shares for approximately $971 million under this program.