Nike, Inc. reported earnings in its fiscal fourth quarter ended May 31, down 5 percent year-over-year but topped Wall Street estimates. Sales were down one percent as a 7 percent decline in its wholesale segment was offset by a 7 percent gain in direct sales. 

Highlights from the quarter include:

  • Fourth-quarter reported revenues were $12.2 billion, down one percent compared to the prior year and up 3 percent on a currency-neutral basis;
  • NIKE Direct reported revenues for the fourth quarter were $4.8 billion, up 7 percent compared to the prior year and up 11 percent on a currency-neutral basis;
  • Wholesale reported revenues for the fourth quarter were $6.8 billion, down 7 percent compared to the prior year and down 3 percent on a currency-neutral basis;
  • Gross margin for the fourth quarter decreased by 80 basis points to 45 percent;
  • Diluted earnings per share were $0.90 for the fourth quarter; and
  • Nike announced its Board of Directors had authorized a four-year, $18 billion program to repurchase Nike’s Class B common stock shares.

Earnings of 90 cents a share topped Wall Street’s consensus target of 82 cents. Revenues of $12.2 billion topped Wall Street’s consensus estimate of $12.1 billion.

“NIKE’s results this fiscal year are a testament to the unmatched strength of our brands and our deep connection with consumers,” said John Donahoe, president and CEO, Nike, Inc. “Our competitive advantages, including our pipeline of innovative products and expanding digital leadership, prove that our strategy is working as we create value through our relentless drive to serve the future of sport.”

Fourth-quarter NIKE Direct revenues grew 7 percent on a reported basis and 11 percent on a currency-neutral basis, led by 25 percent growth in EMEA, 43 percent growth in APLA and 5 percent growth in North America, partially offset by a decline in Greater China. 

NIKE Brand Digital grew 15 percent on a reported basis and 18 percent on a currency-neutral basis, driven by double-digit growth in APLA, North America and EMEA. 

NIKE-owned stores declined two percent on a reported basis and increased one percent on a currency-neutral basis.

“In this dynamic environment, Nike’s unrivaled strengths continue to fuel our momentum,” said Matt Friend, executive vice president and chief financial officer, Nike, Inc. “Two years into executing our Consumer Direct Acceleration, we are better positioned than ever to drive long-term growth while serving consumers directly at scale.”**

Non-Recurring Items Impacting Comparability In The Fourth Quarter
Fourth-quarter results contain non-comparable items, including non-recurring charges recorded in Other (income) expense, net, totaling approximately $150 million, associated with the deconsolidation of its Russian operations and the transition of its businesses in Argentina, Chile and Uruguay to strategic distributor models.

Fourth Quarter Income Statement Review

  • Revenues for Nike, Inc. decreased one percent to $12.2 billion compared to the prior year and were up 3 percent on a currency-neutral basis.
  • Revenues for the Nike Brand were $11.7 billion, down one percent on a reported basis and up 3 percent on a currency-neutral basis, led by 20 percent growth in EMEA.
  • Revenues for Converse were $593 million, down one percent on a reported basis and up 3 percent on a currency-neutral basis due to wholesale revenue declines offset by DTC business growth.
  • Gross margin decreased 80 basis points to 45.0 percent, primarily due to higher inventory obsolescence reserves in Greater China and elevated freight and logistics costs partially offset by strategic pricing actions, favorable changes in net foreign currency exchange rates, including hedges and margin expansion in its NIKE Direct business.
  • Selling and administrative expenses increased 8 percent to $4.0 billion.
  • Demand creation expense was $1.1 billion, up 6 percent, primarily due to increased sports marketing expenses and continued investments in digital marketing to support heightened digital demand.
  • Operating overhead expenses increased 8 percent to $3.0 billion due to higher strategic technology investments and an increase in NIKE Direct variable costs and wage-related expenses.
  • The effective tax rate was 4.7 percent compared to 18.6 percent for the same period last year due to a shift in our earnings mix and a non-cash, one-time benefit related to the onshoring of our non-U.S. intangible property.
  • Net income was $1.4 billion, down 5 percent, and Diluted earnings per share were $0.90, down 3 percent compared to the prior year.

Fiscal 2022 Income Statement Review

  • Revenues for Nike, Inc. increased 5 percent to $46.7 billion, up 6 percent on a currency-neutral basis.
  • Revenues for the Nike Brand were $44.4 billion, up 5 percent on a reported basis and 6 percent on a currency-neutral basis, driven by double-digit growth in NIKE Direct, partially offset by slight declines in wholesale revenues.
  • NIKE Direct revenues were $18.7 billion, up 14 percent on a reported basis and up 15 percent on a currency-neutral basis, led by Nike Brand digital growth of 18 percent and Nike-owned stores were up 10 percent.
  • Revenues for Converse were $2.3 billion, up 6 percent on a reported basis and up 7 percent on a currency-neutral basis, led by double-digit growth in its DTC business, partially offset by lower wholesale revenues.
  • Gross margin increased 120 basis points to 46.0 percent, primarily due to margin expansion in its NIKE Direct business, a higher mix of full-price sales and favorable changes in net foreign currency exchange rates, including hedges, partially offset by elevated freight and logistics costs and higher inventory obsolescence reserves in Greater China in the fourth quarter.
  • Selling and administrative expenses increased 14 percent to $14.8 billion.
  • Demand creation expense was $3.9 billion, up 24 percent compared to the prior year, primarily due to the normalization of spend against brand campaigns and continued investments in digital marketing to support heightened digital demand.
  • Operating overhead expenses increased 11 percent to $11.0 billion due to higher strategic technology investments and an increase in wage-related expenses and NIKE Direct variable costs.
  • The effective tax rate was 9.1 percent, compared to 14.0 percent for the same period last year, due to a shift in our earnings mix and a non-cash, one-time benefit related to the onshoring of our non-U.S. intangible property.
  • Net income was $6.0 billion, up 6 percent, and Diluted earnings per share were $3.75, up 5 percent compared to prior year.

May 31, 2022 Balance Sheet Review
Inventories for Nike, Inc. were $8.4 billion, up 23 percent compared to the prior-year period, driven by elevated in-transit inventories due to extended lead times from ongoing supply chain disruptions, partially offset by consumer demand.

Cash and equivalents and short-term investments were $13.0 billion, $479 million lower than the prior year, as share repurchases and dividends offset free cash flow.

Shareholder Returns
Nike continues to have a strong track record of investing to fuel growth and consistently increase shareholder returns, including 20 consecutive years of increasing dividend payouts.

In the fourth quarter, the company returned approximately $1.5 billion to shareholders, including dividends of $481 million, up 11 percent from the prior year and share repurchases of $1.1 billion, reflecting 8.5 million shares retired as part of the four-year, $15 billion program approved by its Board in June 2018.

In fiscal 2022, the company returned approximately $5.8 billion to shareholders, including dividends of $1.8 billion, up 12 percent from the prior year and share repurchases of $4.0 billion, reflecting 27.3 million shares retired. 

As of May 31, 2022, a total of 77.4 million shares for $8.7 billion were repurchased under the current program.

In June 2022, the company’s Board authorized a four-year, $18 billion program to repurchase NIKE’s Class B common stock shares. Nike’s new program will replace the current $15 billion share repurchase program, which will terminate in the fiscal year 2023. Repurchases under the company’s new program will be made in the open market or privately negotiated transactions in compliance with the SEC Rule 10b-18, subject to market conditions, applicable legal requirements, and other relevant factors. 

The new share repurchase program does not oblige Nike to acquire any common stock, and it may be suspended at any time at the company’s discretion.

Photo courtesy Nike/Nike Air Zoom Mercurial, Bonded colorway