NIKE, Inc. Reports Fiscal 2023 Second Quarter Results

Rhea-AI Summary

NIKE, Inc. (NYSE:NKE) reported fiscal 2023 Q2 revenues of $13.3 billion, up 17% year-over-year and 27% on a currency-neutral basis. NIKE Direct sales reached $5.4 billion, an increase of 16%. The gross margin decreased by 300 basis points to 42.9%, impacted by higher markdowns and logistics costs. Net income remained flat at $1.3 billion, resulting in diluted earnings per share of $0.85, a 2% increase. NIKE returned $2.1 billion to shareholders, maintaining a strong dividend track record with 21 consecutive years of increases.

Positive

• Revenues increased 17% to $13.3 billion.
• NIKE Direct sales rose 16% to $5.4 billion.
• Diluted EPS increased 2% to $0.85.

Negative

• Gross margin decreased by 300 basis points to 42.9%.
• Inventories rose 43% to $9.3 billion due to supply chain issues.
• Cash and equivalents decreased by approximately $4.5 billion.

BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported fiscal 2023 financial results for its second quarter ended November 30, 2022.

• Second quarter reported revenues were $13.3 billion, up 17 percent compared to the prior year and up 27 percent on a currency-neutral basis*
• NIKE Direct sales were $5.4 billion, up 16 percent on a reported basis and up 25 percent on a currency-neutral basis
• NIKE Brand Digital sales increased 25 percent on a reported basis, or 34 percent on a currency-neutral basis
• Wholesale revenues grew 19 percent on a reported basis and 30 percent on a currency-neutral basis
• Gross margin decreased 300 basis points to 42.9 percent
• Diluted earnings per share for the quarter was $0.85, up 2 percent

"NIKE’s results this quarter are a testament to our deep connection with consumers," said John Donahoe, President and CEO, NIKE, Inc. “Our growth was broad-based and was driven by our expanding digital leadership and brand strength. These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum."**

Executive Vice President and Chief Financial Officer, Matthew Friend, said, "Consumer demand for NIKE's portfolio of brands continues to drive strong business momentum in a dynamic environment. We remain focused on what we can control, and we are on track to deliver on our operational and financial goals — setting the foundation for sustainable, profitable growth."**

Second Quarter Income Statement Review

• Revenues for NIKE, Inc. increased 17 percent to $13.3 billion compared to the prior year and were up 27 percent on a currency-neutral basis.
  • Revenues for the NIKE Brand were $12.7 billion, up 18 percent on a reported basis and up 28 percent on a currency-neutral basis, with strong growth across all geographies and channels.
  • Revenues for Converse were $586 million, up 5 percent on a reported basis and up 12 percent on a currency-neutral basis, led by double-digit growth in North America, partially offset by declines in Asia.
• Gross margin decreased 300 basis points to 42.9 percent, primarily due to higher markdowns to liquidate inventory, particularly in North America; continued unfavorable changes in net foreign currency exchange rates; elevated freight and logistics costs and increased product input costs; partially offset by strategic pricing actions.
• Selling and administrative expense increased 10 percent to $4.1 billion.
  • Demand creation expense was $1.1 billion, up 8 percent, primarily due to advertising and marketing.
  • Operating overhead expense increased 10 percent to $3.0 billion, primarily due to wage-related expenses, strategic technology investments and higher NIKE Direct costs.
• The effective tax rate for the quarter was 19.3 percent compared to 10.9 percent for the same period last year due to decreased benefits from stock-based compensation and a shift in our earnings mix.
• Net income was $1.3 billion, flat compared to prior year, and Diluted earnings per share was $0.85, increasing 2 percent.

November 30, 2022 Balance Sheet Review

• Inventories for NIKE, Inc. were $9.3 billion, up 43 percent compared to the prior year period, driven by an increase in units from lapping prior year supply chain disruption, as well as higher input costs.
• Cash and equivalents and short-term investments were $10.6 billion, down approximately $4.5 billion from last year, as free cash flow was offset by share repurchases and cash dividends.

Shareholder Returns

NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 21 consecutive years of increasing dividend payouts. In the second quarter, NIKE returned approximately $2.1 billion to shareholders, including:

• Dividends of $480 million, up 10 percent from the prior year.
• Share repurchases of $1.6 billion, reflecting 16.5 million retired shares as part of the four-year, $18 billion program approved by the Board of Directors in June 2022. As of November 30, 2022, a total of 19.0 million shares have been repurchased under the program for a total of approximately $1.9 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 20, 2022, to review fiscal second quarter results. The conference call will be broadcast live via the Internet and can be accessed at http://investors.nike.com. For those unable to listen to the live broadcast, an archived version will be available at the same location through approximately 9:00 p.m. PT, January 9, 2023.

About NIKE, Inc.

NIKE, Inc., based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.nike.com. Individuals can also visit http://about.nike.com/en/newsroom and follow @NIKE.

*	See additional information in the accompanying Divisional Revenues table regarding this non-GAAP financial measure.
**	The marked paragraphs contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed from time to time in reports filed by NIKE with the U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In millions, except per share data)		THREE MONTHS ENDED								%		SIX MONTHS ENDED								%
		11/30/2022				11/30/2021				Change		11/30/2022				11/30/2021				Change
Revenues		$	13,315			$	11,357			17%		$	26,002			$	23,605			10%
Cost of sales			7,604				6,144			24%			14,676				12,696			16%
Gross profit			5,711				5,213			10%			11,326				10,909			4%
Gross margin			42.9	%			45.9	%					43.6	%			46.2	%
Demand creation expense			1,102				1,017			8%			2,045				1,935			6%
Operating overhead expense			3,022				2,742			10%			5,999				5,396			11%
Total selling and administrative expense			4,124				3,759			10%			8,044				7,331			10%
% of revenues			31.0	%			33.1	%					30.9	%			31.1	%
Interest expense (income), net			16				55			—			29				112			—
Other (income) expense, net			(79	)			(102	)		—			(225	)			(141	)		—
Income before income taxes			1,650				1,501			10%			3,478				3,607			-4%
Income tax expense			319				164			95%			679				396			71%
Effective tax rate			19.3	%			10.9	%					19.5	%			11.0	%
NET INCOME		$	1,331			$	1,337			0%		$	2,799			$	3,211			-13%
Earnings per common share:
Basic		$	0.85			$	0.84			1%		$	1.79			$	2.03			-12%
Diluted		$	0.85			$	0.83			2%		$	1.77			$	1.98			-11%
Weighted average common shares outstanding:
Basic			1,559.0				1,582.4						1,563.1				1,582.2
Diluted			1,572.4				1,617.4						1,579.1				1,618.5
Dividends declared per common share		$	0.340			$	0.305					$	0.645			$	0.580

NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in millions)		November 30,				November 30,				% Change
		2022				2021
ASSETS
Current assets:
Cash and equivalents		$	6,490			$	10,751			-40%
Short-term investments			4,131				4,352			-5%
Accounts receivable, net			5,437				3,746			45%
Inventories			9,326				6,506			43%
Prepaid expenses and other current assets			2,063				1,822			13%
Total current assets			27,447				27,177			1%
Property, plant and equipment, net			4,854				4,812			1%
Operating lease right-of-use assets, net			2,809				3,017			-7%
Identifiable intangible assets, net			280				265			6%
Goodwill			281				242			16%
Deferred income taxes and other assets			3,976				3,404			17%
TOTAL ASSETS		$	39,647			$	38,917			2%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	500			$	—			—
Notes payable			7				9			-22%
Accounts payable			2,810				2,795			1%
Current portion of operating lease liabilities			426				462			-8%
Accrued liabilities			6,020				5,431			11%
Income taxes payable			436				160			173%
Total current liabilities			10,199				8,857			15%
Long-term debt			8,924				9,417			-5%
Operating lease liabilities			2,668				2,835			-6%
Deferred income taxes and other liabilities			2,584				2,884			-10%
Redeemable preferred stock			—				—			—
Shareholders’ equity			15,272				14,924			2%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	39,647			$	38,917			2%

NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
												% Change Excluding Currency Changes1												% Change Excluding Currency Changes1
(Dollars in millions)		THREE MONTHS ENDED								%				SIX MONTHS ENDED								%
		11/30/2022				11/30/2021				Change				11/30/2022				11/30/2021				Change
North America
Footwear		$	3,963			$	2,852			39%		39%		$	7,768			$	6,116			27%		27%
Apparel			1,685				1,480			14%		14%			3,179				2,910			9%		10%
Equipment			182				145			26%		26%			393				330			19%		19%
Total			5,830				4,477			30%		31%			11,340				9,356			21%		21%
Europe, Middle East & Africa
Footwear			2,063				1,806			14%		37%			4,075				3,789			8%		27%
Apparel			1,281				1,202			7%		28%			2,434				2,361			3%		22%
Equipment			145				134			8%		30%			313				299			5%		23%
Total			3,489				3,142			11%		33%			6,822				6,449			6%		25%
Greater China
Footwear			1,370				1,235			11%		21%			2,603				2,684			-3%		4%
Apparel			393				564			-30%		-24%			767				1,040			-26%		-21%
Equipment			25				45			-44%		-39%			74				102			-27%		-23%
Total			1,788				1,844			-3%		6%			3,444				3,826			-10%		-4%
Asia Pacific & Latin America
Footwear			1,108				887			25%		40%			2,172				1,909			14%		27%
Apparel			435				402			8%		24%			848				787			8%		22%
Equipment			56				58			-3%		8%			114				116			-2%		10%
Total			1,599				1,347			19%		34%			3,134				2,812			11%		25%
Global Brand Divisions2			18				6			200%		200%			32				13			146%		149%
TOTAL NIKE BRAND			12,724				10,816			18%		28%			24,772				22,456			10%		19%
Converse			586				557			5%		12%			1,229				1,186			4%		10%
Corporate3			5				(16	)		—		—			1				(37	)		—		—
TOTAL NIKE, INC. REVENUES		$	13,315			$	11,357			17%		27%		$	26,002			$	23,605			10%		18%
TOTAL NIKE BRAND
Footwear		$	8,504			$	6,780			25%		36%		$	16,618			$	14,498			15%		23%
Apparel			3,794				3,648			4%		14%			7,228				7,098			2%		10%
Equipment			408				382			7%		17%			894				847			6%		14%
Global Brand Divisions2			18				6			200%		200%			32				13			146%		149%
TOTAL NIKE BRAND REVENUES		$	12,724			$	10,816			18%		28%		$	24,772			$	22,456			10%		19%
1 The percent change has been calculated using actual exchange rates in use during the comparative prior year period and is provided to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. Management uses this non-GAAP financial measure when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing the Company’s underlying business performance and trends. References to this measure should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.
2 Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.
3 Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through the Company’s central foreign exchange risk management program.

NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES1
(Unaudited)
(Dollars in millions)		THREE MONTHS ENDED								%		SIX MONTHS ENDED								%
		11/30/2022				11/30/2021				Change		11/30/2022				11/30/2021				Change
North America		$	1,497			$	1,235			21%		$	2,874			$	2,669			8%
Europe, Middle East & Africa			990				806			23%			1,965				1,681			17%
Greater China			511				569			-10%			1,052				1,270			-17%
Asia Pacific & Latin America			485				388			25%			985				869			13%
Global Brand Divisions2			(1,226	)			(1,071	)		-14%			(2,413	)			(2,058	)		-17%
TOTAL NIKE BRAND1			2,257				1,927			17%			4,463				4,431			1%
Converse			153				132			16%			362				336			8%
Corporate3			(744	)			(503	)		-48%			(1,318	)			(1,048	)		-26%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1			1,666				1,556			7%			3,507				3,719			-6%
EBIT margin1			12.5	%			13.7	%					13.5	%			15.8	%
Interest expense (income), net			16				55			—			29				112			—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES		$	1,650			$	1,501			10%		$	3,478			$	3,607			-4%
1 The Company evaluates the performance of individual operating segments based on earnings before interest and taxes (commonly referred to as “EBIT”), which represents Net income before Interest expense (income), net and Income tax expense. EBIT margin is calculated as EBIT divided by total NIKE, Inc. Revenues. Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin are considered non-GAAP financial measures. Management uses these non-GAAP financial measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional information that should be considered when assessing the Company’s underlying business performance and trends. References to EBIT and EBIT margin should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.
2 Global Brand Divisions primarily represent demand creation and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.
3 Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221220005681/en/

Investor Contact:

Paul Trussell

investor.relations@nike.com

Media Contact:

KeJuan Wilkins

media.relations@nike.com

Source: NIKE, Inc.

FAQ

What are NIKE's fiscal Q2 2023 financial results?

NIKE reported Q2 revenues of $13.3 billion, a 17% increase year-over-year, with diluted EPS of $0.85, up 2%.

How did NIKE's Direct sales perform in Q2 2023?

NIKE Direct sales reached $5.4 billion, a 16% increase compared to the previous year.

What was the change in NIKE's gross margin in Q2 2023?

The gross margin for NIKE decreased by 300 basis points to 42.9% due to higher markdowns and costs.

How much did NIKE return to shareholders in Q2 2023?

NIKE returned approximately $2.1 billion to shareholders, including $480 million in dividends.

What impacted NIKE's inventory levels in Q2 2023?

Inventories rose 43% to $9.3 billion, primarily due to supply chain disruptions and higher input costs.