Nike Inc. reported revenues climbed 10% in the second quarter and would have been up 11% excluding currency changes. Diluted earnings per share grew 22% to $457 million, or 94 cents a share. Nike brand futures orders were ahead 11%.
“We had a great second quarter. Almost every brand, category and geography delivered growth,” said Mark Parker, president and CEO of Nike, Inc. “We continue to outperform the market thanks to our innovative product, compelling brands and strong marketplace management. That's good for athletes and consumers, good for our industry, and it's good for our shareholders. Going forward, we're in the enviable position of having far more opportunities than challenges. I'm confident our strategies can continue to deliver sustainable, profitable growth.”
Futures Orders
As of the end of the quarter futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from December 2010 through April 2011, totaled $7.7 billion, 11 percent higher than orders reported for the same period last year with minimal impact from changes in foreign currency exchange rates compared to the prior year.*
By geography, futures orders were as follows:
| Geography | Reported Futures Orders | Excluding Currency Changes | ||
| North America | +16% | +16% | ||
| Western Europe | 0% | +3% | ||
| Central and Eastern Europe | +9% | +11% | ||
| Greater China | +18% | +14% | ||
| Japan | -2% | -5% | ||
| Emerging Markets | +15% | +15% | ||
Total NIKE Brand Futures Orders | +11% | +11% |
Second Quarter Income Statement Review
* Revenues increased 10% to $4.8 billion. Excluding the impacts of changes in foreign currency, NIKE, Inc. revenue increased 11%. Revenues for the NIKE Brand were up 9%, or up 10% on a currency neutral basis, driven by growth in all seven NIKE Brand key categories except Sportswear, which was down slightly compared to the prior year, and every geography except Japan. Our Other Businesses revenues increased 13%, with a minimal impact from changes in foreign currency exchange rates, as Cole Haan, Converse, Hurley, NIKE Golf and Umbro all experienced growth during the quarter.
* Gross margins improved 80 basis points to 45.3%. The improvement was due to a higher mix of full-price sales and fewer and more profitable close-out sales resulting from strong demand for our products and cleaner inventory positions, as well as improved profitability from our Direct to Consumer operations. These factors more than offset margin pressure from higher total freight costs, including additional airfreight costs incurred to meet strong demand for NIKE Brand products.
* Selling and administrative expenses were up 9% to $1.6 billion mainly due to operating overhead, which increased 14% to $1.0 billion. This increase was a result of additional investments made in both our wholesale and Direct to Consumer businesses, higher performance based compensation expense and meeting and travel expense increases given comparisons to reduced levels last year. Demand Creation spending was inline with the same period last year at $574 million.
* Other income was $28 million, comprised largely of non-recurring items and 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 income, net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits had an insignificant impact on pretax income.
* The effective tax rate was 25.0% compared to 23.6% for the same period last year. The effective tax rate was higher due to a larger%age of pretax income coming from operations in the United States, which has a higher effective tax rate than operations abroad.
* Net income increased 22% to $457 million and diluted earnings per share increased 24% to $0.94, reflecting higher net income and an approximate 1% decline in the number of diluted weighted average common shares outstandNIKE, Inc. Reports Fiscal 2011 Second Quarter Results
* Revenue $4.8 billion; up 10 percent versus prior year or up 11 percent excluding currency changes
* Diluted earnings per share up 24 percent from prior year to $0.94
* NIKE Brand futures orders up 11 percent
* Inventories up 8 percent versus prior year.
November 30, 2010 Balance Sheet Review
* Inventories for NIKE, Inc. were $2.3 billion, up 8% from November 30, 2009.
* Cash and short-term investments at period-end were $4.8 billion, 19% higher than last year mainly as a result of higher net income.
Share Repurchases
During the second quarter, the company repurchased a total of 3.5 million shares for approximately $280 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 second quarter the company has purchased a total of 17.4 million shares for approximately $1.3 billion under this program.
| NIKE, Inc. | ||||||||||||||||||||||
| CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||||||||||
| FOR THE PERIOD ENDED NOVEMBER 30, 2010 | ||||||||||||||||||||||
| (In millions, except per share data) | ||||||||||||||||||||||
| QUARTER ENDED | YEAR TO DATE ENDED | |||||||||||||||||||||
| INCOME STATEMENT | 11/30/2010 | 11/30/2009 | % Chg | 11/30/2010 | 11/30/2009 | % Chg | ||||||||||||||||
| Revenues | $ | 4,842 | $ | 4,405 | 10 | % | $ | 10,017 | $ | 9,204 | 9 | % | ||||||||||
| Cost of sales | 2,649 | 2,445 | 8 | % | 5,390 | 5,028 | 7 | % | ||||||||||||||
| Gross margin | 2,193 | 1,960 | 12 | % | 4,627 | 4,176 | 11 | % | ||||||||||||||
| 45.3 | % | 44.5 | % | 46.2 | % | 45.4 | % | |||||||||||||||
| Demand creation expense | 574 | 573 | 0 | % | 1,253 | 1,127 | 11 | % | ||||||||||||||
| Operating overhead expense | 1,037 | 906 | 14 | % | 2,031 | 1,898 | 7 | % | ||||||||||||||
| Total selling and administrative expense | 1,611 | 1,479 | 9 | % | 3,284 | 3,025 | 9 | % | ||||||||||||||
| 33.3 | % | 33.6 | % | 32.8 | % | 32.9 | % | |||||||||||||||
| Other (income), net | (28 | ) | (12 | ) | 133 | % | (21 | ) | (24 | ) | -13 | % | ||||||||||
| Interest expense, net | 1 | 2 | -50 | % | – | 3 | -100 | % | ||||||||||||||
| Income before income taxes | 609 | 491 | 24 | % | 1,364 | 1,172 | 16 | % | ||||||||||||||
| Income taxes | 152 | 116 | 31 | % | 348 | 284 | 23 | % | ||||||||||||||
| 25.0 | % | 23.6 | % | 25.5 | % | |||||||||||||||||
