NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2013 first quarter ended August 31, 2012. Strong demand for NIKE, Inc. brands propelled first quarter revenue to new record highs. As expected, diluted earnings per share were lower due to lower gross margin, higher SG&A and an increase in the tax rate.
“We had a strong first quarter and a great start to the fiscal year. NIKE, Inc. delivered an amazing array of innovation across some of the biggest moments in sport,” said Mark Parker, President and CEO, NIKE, Inc. “Innovation is how great companies sustain growth and build competitive separation,” Parker added. “We’ll continue to make strategic investments across our portfolio of businesses to capture our full potential over the long term and drive shareholder value.”*
First Quarter Income Statement Review
- Revenues for NIKE, Inc. increased 10 percent to $ 6.7 billion, up 15 percent on a currency-neutral basis. Excluding the impacts of changes in foreign currency, NIKE Brand revenues rose 16 percent, with growth in all key categories and every geography except Japan. Revenues on a currency-neutral basis for Other Businesses increased 9 percent, while Businesses to be Divested grew by 6 percent.
- Gross margin declined 80 basis points to 43.5 percent. Gross margin continued to benefit from pricing actions and product cost reduction initiatives, however, this was more than offset by higher input costs, primarily materials and labor. In addition, gross margin was negatively impacted by a shift in the Company’s mix to lower margin businesses within the NIKE Brand and the conversion of the China market to direct distribution for Converse.
- Selling and administrative expenses grew at a faster rate than revenue, up 18 percent to $2.2 billion. Demand creation expenses increased 29 percent to $891 million due to marketing support for key product initiatives, as well as support for the Olympics and European Football Championships. Operating overhead expenses increased 12 percent to $1.3 billion due to additional investments made in the wholesale business to support growth initiatives and higher Direct to Consumer costs from the addition of new stores over the last year.
- Other income, net was $29 million, comprised primarily of foreign exchange related gains. For the quarter, the Company estimates the year-over-year change in foreign currency related gains and losses included in other 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 $28 million.
- The effective tax rate was 27.5 percent compared to 24.3 percent for the same period last year. The effective tax rate was higher due to a larger percentage of earnings coming from higher tax countries, primarily the United States, as well as a higher effective tax rate on operations abroad.
- Net income decreased 12 percent to $567 million while diluted earnings per share decreased 10 percent to $1.23, reflecting a 3 percent decline in the weighted average diluted common shares outstanding. In a press release issued on May 31, 2012, the Company announced its intention to divest of the Cole Haan and Umbro businesses. Pro Forma diluted earnings per share, excluding the results of the Businesses to be Divested, would have been approximately $1.27, down 9 percent compared to the first quarter of fiscal 2012 on a comparable basis.**
August 31, 2012 Balance Sheet Review
- Inventories for NIKE, Inc. were $3.4 billion, up 10 percent from August 31, 2011, in line with revenue growth, and reflecting strong demand for NIKE, Inc. products.
- Cash and short-term investments were $3.3 billion, $433 million lower than last year as share repurchases and dividend payments increased year-on-year and the Company made debt repayments.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV