Nike Inc. reported first-quarter revenues grew 17% to $5.4 billion, compared to $4.7 billion for the same period last year. Changes in currency exchange rates increased revenue growth by 7 percentage points for the quarter.
First quarter net income for the period ended August 31 decreased 10% to $510.5 million, or $1.03 a share, from $569.7 million, or $1.12, a year ago. In the prior years first quarter, the company received a one-time tax benefit of $105.4 million, which contributed 20 cents per diluted share. Adjusted for this prior year benefit, net income and earnings per share would have grown 10% and 12%, respectively.
“Nikes first-quarter results reflect the strength of our brands and our global business,” said NIKE, Inc. President and CEO Mark Parker. “Our relentless focus on product innovation and premium consumer experiences generated balanced growth across every region and market share gains in key categories.”
Parker concluded, “Nike is able to connect with consumers and energize the market like nobody else. As we combine that with running a strong and smart business, we generate new growth, deliver strong cash flows, and create greater value for our shareholders.”
Futures Orders
The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from September 2008 through January 2009, totaling $6.8 billion, 10% higher than such orders reported for the same period last year. Changes in currency exchange rates increased reported orders growth by 1 percentage point.
By region, futures orders for the
Regional Highlights
During the first quarter,
First quarter revenues for the European region grew 20% to $1.8 billion from $1.5 billion for the same period last year. Changes in currency exchange rates increased revenue growth by 15 percentage points. Footwear revenues increased 24% to $982.4 million. Apparel revenues grew by 15% to $649.7 million and equipment revenues increased 20% to $146.6 million. Pre-tax income increased 17% to $442.4 million.
In the first quarter, revenues in the Asia Pacific region grew 36% to $860.6 million compared to $633.7 million a year ago. Changes in currency exchange rates increased revenue growth by 10 percentage points. Footwear revenues were up 37% to $454.0 million, apparel revenues increased 38% to $332.7 million and equipment revenues grew 21% to $73.9 million. Pre-tax income increased 15% to $185.5 million.
Revenues in the
Other Businesses
For the first quarter, Other business revenues, which include Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd, which was acquired in the fourth quarter of last year, grew 7% to $655.3 million from $612.8 million last year and pre-tax income decreased 9% to $86.3 million.
Current year amounts are not directly comparable to the prior year due to changes in the companys affiliate brands portfolio. In the first quarter of last year the companys Other business segment included Converse Inc., NIKE Golf, Cole Haan, Hurley International LLC, the Starter Brand and NIKE Bauer Hockey. Following a corporate strategic review the Starter Brand and NIKE Bauer Hockey were sold in the third and fourth quarter of fiscal 2008, respectively. First quarter revenues and pretax income for the continuing Other businesses (Converse Inc., NIKE Golf, Cole Haan and Hurley International LLC) grew 20% and 19%, respectively.
Income Statement Review
In the first quarter of fiscal 2009 gross margins were 47.2% compared to 44.8% for the same period last year. The increase in gross margin versus the prior year quarter reflects an improved product, regional and owned retail mix; price increases in the companys U.S. and EMEA regions; favorable hedge results; sourcing cost initiatives; and higher margins in our Other businesses, partially offset by higher input costs and lower apparel margins in the U.S.
As anticipated, selling and administrative expenses were 34.2% of first quarter revenue compared to 30.8% for the same period last year due to demand creation spend in support of the European Championships and the Olympic games in
Balance Sheet Review
At quarter end, global inventories stood at $2.5 billion, an increase of 14% from August 31, 2007. Cash and short-term investments were $2.6 billion at the end of the quarter, compared to $2.8 billion at the end of the first quarter last year.
Share Repurchase Program
During the first quarter, the company repurchased a total of 7.1 million shares for approximately $429.8 million in conjunction with the companys four-year, $3 billion share repurchase program approved by the Board of Directors in June 2006. As of the end of the first quarter the company has repurchased a total of 45.7 million shares for approximately $2.5 billion under this program. On September 22, the company also announced a new, four-year $5 billion share repurchase program to commence upon the completion of its current $3 billion program.
NIKE, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED AUGUST 31, 2008
(In millions, except per share data)
QUARTER ENDED
INCOME STATEMENT
08/31/2008
08/31/2007
% Chg
Revenues
$5,432.2
$4,655.1
17%
Cost of sales
2,870.1
2,568.1
12%
Gross margin
2,562.1
2,087.0
23%
47.2%
44.8%
Selling and administrative expense
1,856.4
1,434.7
29%
34.2%
30.8%
Interest income, net
10.1
24.6
-59%
Other expense, net
(1.6)
(6.6)
76%
Income before income taxes
714.2
670.3
7%
Income taxes
203.7
100.6
102%
28.5%
15.0%
Net income
$510.5
$569.7
-10%
Diluted EPS
$1.03
$1.12
-8%
Basic EPS
$1.05
$1.14
-8%
Weighted Average Common Shares Outstanding:
Diluted
494.9
507.3
Basic
487.2
499.4
Dividends declared
$0.23
$0.185
| NIKE, Inc. | |||||
QUARTER ENDED | |||||
| DIVISIONAL REVENUES1 | 08/31/2008 | 08/31/2007 | % Chg | ||
| (In millions) | |||||
| U.S. Region | |||||
| Footwear | $1,219.8 | $1,119.9 | 9% | ||
