NIKE has reported financial results for its 2018 fourth quarter and full financial year ended May 31, 2018. Thanks to a ‘complete digital transformation’ in areas such as direct-to-consumer sales, the company’s revenues saw strong growth of 13% in fiscal Q4 and 6% in the fiscal full year 2017-18.
Fourth quarter revenue increased 13% to US$9.8 billion, up 8% on a currency-neutral basis. This was driven by strong double-digit revenue growth in international markets and NIKE Direct globally, and a return to growth in North America. Diluted earnings per share for the fourth quarter rose 15% to US$0.69, primarily due to strong revenue growth, gross margin expansion, a lower tax rate and a lower average share count, which were partially offset by higher selling and administrative expense.
“Our new innovation is winning with consumers, driving significant momentum in our international geographies and a return to growth in North America,” said Mark Parker, Chairman, President and CEO at NIKE. “Fuelled by a complete digital transformation of our company end-to-end, this year set the foundation for Nike’s next wave of long-term, sustainable growth and profitability.”
The company also announced that its Board of Directors has authorized a new four-year, US$15 billion program to repurchase shares of NIKE’s Class B Common Stock. The company anticipates that the current US$12 billion share repurchase program will be completed within fiscal 2019, and the new program will commence upon the completion of the current program.
By the numbers:
- 80%: New innovation drove more than 80% of Nike’s growth in FY18, fueled by the Air VaporMax, React, AirMax 270 and ZoomX platforms.
- US$2.6 billion: Nike Sportswear, the industry’s largest sportswear business, delivered a record quarter with more than $US2.6 billion in revenue in Q4.
- 35%: Nike’s Greater China business had its best quarter in more than six years, growing 35% in Q4.
Fiscal Q4 summary
- Revenues for NIKE increased 13% to US$9.8 billion, up 8% on a currency-neutral basis.
- Revenues for the NIKE Brand were US$9.3 billion, up 9% on a currency-neutral basis, driven by double-digit increases in NIKE Direct, international geographies, Sportswear, Global Football and growth in North America.
- Gross margin increased 60 basis points to 44.7% due primarily to higher average selling prices, margin expansion in NIKE Direct and favourable full-price sales mix.
- Selling and administrative expense increased 17% to US$3.1 billion. Demand creation expense was US$983 million, up 25%, primarily driven by sports marketing investments, new product launch and brand campaigns, and unfavorable changes in foreign currency exchange rates.
Fiscal full year 2017-18 summary
- Revenues for NIKE rose 6% to US$36.4 billion, up 4% on a currency-neutral basis.
- Also, on a currency-neutral basis, revenues for the NIKE Brand were US$34.5 billion, up 5%.
- NIKE Brand sales to wholesale customers increased 2% while NIKE Direct revenues grew 12% to US$10.4 billion, driven by a 25% increase in digital commerce sales, the addition of new stores and 4% growth in comparable store sales.
- NIKE Brand revenue growth was driven by continued strength in international markets and NIKE Direct with growth across footwear and apparel and key categories including Sportswear and NIKE Basketball.
- Gross margin decreased 80 basis points to 43.8% driven by 90 basis points of unfavourable changes in foreign currency exchange rates.
- Selling and administrative expense increased 9% to US$11.5 billion. Demand creation expense was US$3.6 billion, up 7%, primarily due to sports marketing investments.
During the fourth quarter, NIKE repurchased a total of 23.1 million shares for approximately US$1.6 billion as part of the four-year, US$12 billion program approved by the Board of Directors in November 2015. As of May 31, 2018, a total of 149.4 million shares had been repurchased under this program for approximately US$8.7 billion.
The company’s new US$15 billion program will commence upon the completion of the existing program, which is expected to be completed within fiscal 2019. Repurchases under the company’s new program will be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements and other relevant factors.
The new share repurchase program does not obligate the company to acquire any particular amount of common stock, and it may be suspended at any time at the company’s discretion.
