Nike Inc. reported earnings rose 7% to $4.7 billion from $4.4 billion. Excluding changes in currency exchange rates, net revenue was up 2% compared to the same quarter last year. Excluding charges in the year-ago period, net income increased 2%.
Third quarter net income was $496 million or $1.01 per diluted share, compared to $244 million or 50 cents, in the same period last year. Results from last year included a $241 million, after-tax non-cash charge related to the impairment of goodwill, intangible and other assets of the company’s Umbro subsidiary.
“We had a great quarter,” said Mark Parker, NIKE, Inc. President and Chief Executive Officer. “Today’s results reinforce our belief that when we connect with consumers in deep and meaningful ways from product concepts to how they experience our brands, we win in the marketplace and drive sustainable, profitable growth.”
Futures Orders
The company reported worldwide futures orders for NIKE Brand athletic footwear and apparel, scheduled for delivery from March through July 2010, totaling $7.1 billion, 9% higher than orders reported for the same period last year. Excluding currency changes, orders would have increased 6%.
By geography and in total for the NIKE Brand, futures orders were as follows:
Geography | Reported Futures Orders | Excluding Currency Changes | ||
| North America | 4% | 4% | ||
| Western Europe | 11% | 7% | ||
| Central and Eastern Europe | -4% | -9% | ||
| Greater China | 10% | 9% | ||
| -15% | -16% | |||
| Emerging Markets | 44% | 36% | ||
| Total NIKE Brand | 9% | 6% |
During the third quarter, revenue for North America increased 1% to $1.7 billion. Footwear revenues of $1.2 billion were down 1% compared to last year, apparel revenues grew 6% to $409 million and equipment revenues increased 8% to $85 million. Earnings before interest and taxes (EBIT) for North America improved 4% to $402 million.
Western Europe
Third quarter revenue for Western Europe increased 4% to $929 million. Compared to the same period last year, footwear revenue increased 8% to $577 million, apparel revenue declined 1% to $300 million and equipment revenue decreased 4% to $52 million. Third quarter EBIT was flat to last year at $199 million.
Central and Eastern Europe
In the third quarter, revenue for Central and Eastern Europe declined 8% to $272 million. Footwear revenue decreased 2% to $159 million, apparel revenue was down 17% to $94 million and equipment revenue dropped 15% to $19 million. Compared to the same period last year, EBIT was down 47% to $50 million.
Greater China
Revenue for Greater China during the third quarter was up 10% to $458 million. Footwear revenue grew 12% to $279 million, apparel revenue increased 8% to $154 million, and equipment revenue was up 13% to $26 million. Third quarter EBIT improved 21% to $176 million.
Japan
Japan’s third quarter revenue was down 7% to $213 million. Compared to the prior year, footwear revenue declined 6% to $103 million, apparel revenue dropped 9% to $87 million and equipment revenue decreased 9% to $23 million. EBIT declined 16% in the third quarter to $40 million.
Emerging Markets
In the Emerging Markets revenue was up 43% to $509 million for the third quarter. Footwear revenue increased 53% to $352 million, apparel revenue rose 32% to $119 million and equipment revenue increased 10% to $38 million. EBIT for the Emerging Markets in the third quarter improved 72% to $122 million.
Other Businesses
Revenue in the third quarter for Other Businesses, which includes Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd. increased 13% to $656 million. Third quarter EBIT was $105 million versus a loss of $343 million last year. Last years results included a $401 million pre-tax non-cash impairment charge to reduce the carrying value of Umbros goodwill, intangible and other assets. Excluding this charge, EBIT increased 80% compared to the same period last year.
Income Statement Review
In the third quarter of fiscal 2010 gross margins were 46.9% compared to 43.9% for the same period last year. Gross margins for the quarter were higher than the prior year primarily due to improved in-line product margins, less discounted close-out sales and favorable changes in product mix.
Third quarter selling and administrative expenses grew 16% to $1.6 billion. Selling and administrative expenses for the quarter were higher than the same period last year mainly due to the timing of demand creation spending, investments in Company owned retail and higher costs for performance-based compensation.
The effective tax rate for the third quarter was 25.0% compared to a negative 3.6% for the same period last year. Excluding the tax effect of the charge for the impairment of Umbro assets, the effective tax rate for the third quarter of fiscal 2009 would have been 23.9%.
Balance Sheet Review
At the end of the third quarter, global inventories stood at $2.2 billion, down 13% from February 28, 2009. Cash and short-term investments at February 28, 2010 were $4.0 billion, $1.4 billion or 55% higher than last year.
Share Repurchase
During the third quarter, the company repurchased a total of 5,134,092 shares for approximately $329 million. These purchases concluded the Companys previous four-year, $3 billion share repurchase program, approved by the Board of Directors in June 2006. During this program, the company purchased a total of 53.9 million shares.
Having completed the previous program, the company began repurchases under the four-year, $5 billion program approved in September 2008. Of the total shares repurchased during the third quarter 3.7 million shares for approximately $239 million were purchased under this program.
| NIKE, Inc. | ||||||||||||||||||
| CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||||||||
| FOR THE PERIOD ENDED FEBRUARY 28, 2010 | ||||||||||||||||||
| (In millions, except per share data) | ||||||||||||||||||
| QUARTER ENDED | YEAR TO DATE ENDED | |||||||||||||||||
| INCOME STATEMENT | 2/28/2010 | 2/28/2009 | % Chg | 2/28/2010 | 2/28/2009 | % Chg | ||||||||||||
| Revenues | $4,733.0 | $4,440.8 | 7 | % | $13,937.1 | $14,463.1 | -4 | % | ||||||||||
| Cost of sales | 2,515.0 | 2,492.3 | 1 | % | 7,542.9 | 7,902.5 | -5 | % | ||||||||||
| Gross margin | 2,218.0 | 1,948.5 | 14 | % | 6,394.2 | 6,560.6 | -3 | % | ||||||||||
| 46.9 | % | 43.9 | % | 45.9 | % | 45.4 | % | |||||||||||
| Selling and administrative expense | 1,563.8 | 1,352.1 | 16 | % | 4,588.5 | 4,755.3 | -4 | % | ||||||||||
| 33.0 | % | 30.4 | % | 32.9 | % | 32.9 | % | |||||||||||
| Goodwill impairment | 0.0 | 199.3 | -100 | % | 0.0 | 199.3 | -100 | % | ||||||||||
| Intangible and other asset impairment | 0.0 | 202.0 | -100 | % | 0.0 | |||||||||||||
