NIKE, Inc. Reports Fiscal 2024 Third Quarter Results

Rhea-AI Summary

NIKE, Inc. (NKE) reported fiscal 2024 third-quarter results with revenues slightly up to $12.4 billion. Gross margin increased to 44.8%, but net income and diluted earnings per share decreased. The company returned $1.4 billion to shareholders and continues to invest in growth.

Positive

• Revenues for NIKE, Inc. were slightly up on both a reported and currency-neutral basis at $12.4 billion.
• Gross margin increased to 44.8%, driven by strategic pricing actions and lower costs.
• NIKE returned $1.4 billion to shareholders in the third quarter, including dividends and share repurchases.
• The company has a strong track record of consistently increasing dividend payouts for 22 consecutive years.

Negative

• Net income was down 5% to $1.2 billion, and diluted earnings per share decreased 3% to $0.77.
• Revenues for Converse were down 19% on a reported basis and 20% on a currency-neutral basis.
• Cash and equivalents were down approximately $0.2 billion from the prior year.

Insights

Financial Analyst

The reported increase in NIKE's gross margin to 44.8 percent, a rise of 150 basis points, is a significant indicator of the company's pricing power and cost management effectiveness. The margin expansion, attributed to strategic pricing and lower logistics costs, suggests that NIKE is successfully navigating the inflationary pressures that have hampered many retail and consumer goods companies. However, the increased selling and administrative expenses, including restructuring charges, indicate ongoing investments and potential organizational changes that could affect future profitability.

Investors should note the downtrend in net income and diluted earnings per share, which, despite being affected by restructuring charges, could raise concerns about the company's near-term earnings growth trajectory. The reduction in inventories is a positive sign of efficient inventory management, which is important in the retail industry to avoid markdowns and maintain profitability. The continued shareholder returns through dividends and share repurchases reflect management's confidence in the company's financial health and commitment to delivering shareholder value.

Market Research Analyst

The decline in Converse revenues, particularly in North America and Europe, might indicate brand-specific challenges or a broader shift in consumer preferences. This requires close monitoring as it could suggest a need for brand revitalization strategies or product innovation to re-engage with the market. The slight increase in NIKE Brand Digital sales contrasts with the decrease in digital sales, which may point to evolving consumer behavior post-pandemic and the need for NIKE to adapt its digital strategy.

Geographically, the currency-neutral growth in North America, Greater China and APLA against declines in EMEA highlights the uneven global economic recovery and the impact of geopolitical factors on consumer spending. This regional performance variance is essential for investors to consider, as it could influence the company's strategic focus and resource allocation.

Economist

NIKE's financial performance, with its slight revenue increase and gross margin expansion, reflects resilience in a challenging macroeconomic environment. The company's strategic pricing actions to counter higher product input costs demonstrate an ability to leverage brand strength to maintain profitability margins. However, the modest decrease in cash and equivalents, driven by share repurchases and other cash outflows, may raise questions about the sustainability of such financial strategies in the face of potential economic headwinds, such as inflation or currency fluctuations.

The effective tax rate's slight increase from the previous year could be indicative of changing tax regulations or income mix. While NIKE's overall financial health appears stable, the long-term implications of its current strategies, including the ongoing restructuring, will be critical to observe for future fiscal stability and growth.

BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported fiscal 2024 financial results for its third quarter ended February 29, 2024.

• Third quarter revenues were slightly up on both a reported and currency-neutral basis* at $12.4 billion
• NIKE Direct revenues were $5.4 billion, slightly up on a reported and currency-neutral basis
• NIKE Brand Digital sales decreased 3 percent on a reported basis and 4 percent on a currency-neutral basis
• Wholesale revenues were $6.6 billion, up 3 percent on a reported and currency-neutral basis
• Gross margin increased 150 basis points to 44.8 percent, including a detriment of 50 basis points due to restructuring charges
• Selling and administrative expense increased 7 percent to $4.2 billion, including $340 million of restructuring charges
• Diluted earnings per share was $0.77, including $0.21 of restructuring charges. Excluding these charges, Diluted earnings per share would have been $0.98*

“We are making the necessary adjustments to drive NIKE’s next chapter of growth,” said John Donahoe, President & CEO, NIKE, Inc. “We’re encouraged by the progress we’ve seen, as we build a multiyear cycle of new innovation, sharpen our brand storytelling and work with our wholesale partners to elevate and grow the marketplace.”**

Matthew Friend, Executive Vice President & Chief Financial Officer, NIKE, Inc. said, “Our teams are focused on what matters most to return to strong growth. We are taking action to build a faster, more efficient NIKE and maximize the impact of our new innovation cycle.”**

Third Quarter Income Statement Review

• Revenues for NIKE, Inc. were slightly up on both a reported and currency-neutral basis at $12.4 billion.
  • Revenues for the NIKE Brand were $11.9 billion, up 2 percent on a reported and currency-neutral basis, as currency-neutral growth in North America, Greater China and APLA was offset by declines in EMEA.
  • Revenues for Converse were $495 million, down 19 percent on a reported basis and down 20 percent on a currency-neutral basis, primarily due to declines in North America and Europe.
• Gross margin increased 150 basis points to 44.8 percent, primarily driven by strategic pricing actions and lower ocean freight and logistics costs, partially offset by higher product input costs and restructuring charges.
• Selling and administrative expense increased 7 percent to $4.2 billion.
  • Demand creation expense was $1.0 billion, up 10 percent, reflecting an increase in marketing expense.
  • Operating overhead expense increased 6 percent to $3.2 billion, primarily due to restructuring charges, partially offset by lower wage-related expenses.
• The effective tax rate was 16.5 percent compared to 16.0 percent for the same period last year.
• Net income was $1.2 billion, down 5 percent, and Diluted earnings per share was $0.77, decreasing 3 percent.

February 29, 2024 Balance Sheet Review

• Inventories for NIKE, Inc. were $7.7 billion, down 13 percent compared to the prior year, reflecting a decrease in units.
• Cash and equivalents and short-term investments were $10.6 billion, down approximately $0.2 billion from last year, as cash generated by operations was more than offset by share repurchases, cash dividends, capital expenditures and bond repayment.

Shareholder Returns

NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 22 consecutive years of increasing dividend payouts. In the third quarter, NIKE returned approximately $1.4 billion to shareholders, including:

• Dividends of $562 million, up 6 percent from the prior year.
• Share repurchases of $866 million, reflecting 7.9 million shares retired as part of the Company’s four-year, $18 billion program approved by the Board of Directors in June 2022. As of February 29, 2024, a total of 73.8 million shares have been repurchased under the program for a total of approximately $8.0 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on March 21, 2024, to review fiscal third quarter results. The conference call will be broadcast live via the Internet and can be accessed at https://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, April 11, 2024.

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 https://investors.nike.com. Individuals can also visit https://about.nike.com/en/newsroom and follow @NIKE.

*		Non-GAAP financial measures. See additional information in the accompanying Divisional Revenues table and Diluted earnings per share table.
**		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)
	THREE MONTHS ENDED						%		NINE MONTHS ENDED						%
(In millions, except per share data)	2/29/2024			2/28/2023			Change		2/29/2024			2/28/2023			Change
Revenues	$	12,429		$	12,390		0	%	$	38,756		$	38,392		1	%
Cost of sales		6,867			7,019		-2	%		21,503			21,695		-1	%
Gross profit		5,562			5,371		4	%		17,253			16,697		3	%
Gross margin		44.8	%		43.3	%				44.5	%		43.5	%
Demand creation expense		1,011			923		10	%		3,194			2,968		8	%
Operating overhead expense		3,215			3,036		6	%		9,294			9,035		3	%
Total selling and administrative expense		4,226			3,959		7	%		12,488			12,003		4	%
% of revenues		34.0	%		32.0	%				32.2	%		31.3	%
Interest expense (income), net		(52	)		(7	)	—			(108	)		22		—
Other (income) expense, net		(16	)		(58	)	—			(101	)		(283	)	—
Income before income taxes		1,404			1,477		-5	%		4,974			4,955		0	%
Income tax expense		232			237		-2	%		774			916		-16	%
Effective tax rate		16.5	%		16.0	%				15.6	%		18.5	%
NET INCOME	$	1,172		$	1,240		-5	%	$	4,200		$	4,039		4	%
Earnings per common share:
Basic	$	0.77		$	0.80		-4	%	$	2.76		$	2.59		7	%
Diluted	$	0.77		$	0.79		-3	%	$	2.74		$	2.57		7	%
Weighted average common shares outstanding:
Basic		1,513.2			1,543.8					1,520.8			1,556.7
Diluted		1,526.5			1,564.8					1,534.0			1,574.4
Dividends declared per common share	$	0.370		$	0.340				$	1.080		$	0.985

NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	February 29,		February 28,		% Change
(Dollars in millions)	2024		2023
ASSETS
Current assets:
Cash and equivalents	$	8,960	$	6,955	29	%
Short-term investments		1,613		3,847	-58	%
Accounts receivable, net		4,526		4,513	0	%
Inventories		7,726		8,905	-13	%
Prepaid expenses and other current assets		1,928		1,815	6	%
Total current assets		24,753		26,035	-5	%
Property, plant and equipment, net		5,082		4,939	3	%
Operating lease right-of-use assets, net		2,856		2,834	1	%
Identifiable intangible assets, net		259		277	-6	%
Goodwill		240		281	-15	%
Deferred income taxes and other assets		4,166		3,928	6	%
TOTAL ASSETS	$	37,356	$	38,294	-2	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	500	-100	%
Notes payable		6		14	-57	%
Accounts payable		2,340		2,675	-13	%
Current portion of operating lease liabilities		474		435	9	%
Accrued liabilities		5,818		5,594	4	%
Income taxes payable		391		330	18	%
Total current liabilities		9,029		9,548	-5	%
Long-term debt		8,930		8,925	0	%
Operating lease liabilities		2,691		2,692	0	%
Deferred income taxes and other liabilities		2,480		2,598	-5	%
Redeemable preferred stock		—		—	—
Shareholders’ equity		14,226		14,531	-2	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	37,356	$	38,294	-2	%

NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
								% Change Excluding Currency Changes1									% Change Excluding Currency Changes1
	THREE MONTHS ENDED					%				NINE MONTHS ENDED					%
(Dollars in millions)	2/29/2024			2/28/2023		Change				2/29/2024			2/28/2023		Change
North America
Footwear	$	3,460		$	3,322	4	%	4	%	$	10,950		$	11,090	-1	%	-1	%
Apparel		1,408			1,419	-1	%	-1	%		4,555			4,598	-1	%	-1	%
Equipment		202			172	17	%	18	%		613			565	8	%	9	%
Total		5,070			4,913	3	%	3	%		16,118			16,253	-1	%	-1	%
Europe, Middle East & Africa
Footwear		1,960			2,011	-3	%	-3	%		6,406			6,086	5	%	3	%
Apparel		994			1,094	-9	%	-10	%		3,331			3,528	-6	%	-8	%
Equipment		184			141	30	%	27	%		578			454	27	%	23	%
Total		3,138			3,246	-3	%	-4	%		10,315			10,068	2	%	0	%
Greater China
Footwear		1,547			1,496	3	%	5	%		4,195			4,099	2	%	6	%
Apparel		498			461	8	%	10	%		1,368			1,228	11	%	16	%
Equipment		39			37	5	%	9	%		119			111	7	%	11	%
Total		2,084			1,994	5	%	6	%		5,682			5,438	4	%	8	%
Asia Pacific & Latin America
Footwear		1,195			1,141	5	%	5	%		3,639			3,313	10	%	9	%
Apparel		390			407	-4	%	-3	%		1,198			1,255	-5	%	-4	%
Equipment		62			53	17	%	19	%		187			167	12	%	12	%
Total		1,647			1,601	3	%	4	%		5,024			4,735	6	%	6	%
Global Brand Divisions2		9			12	-25	%	-22	%		34			44	-23	%	-24	%
TOTAL NIKE BRAND		11,948			11,766	2	%	2	%		37,173			36,538	2	%	2	%
Converse		495			612	-19	%	-20	%		1,602			1,841	-13	%	-14	%
Corporate3		(14	)		12	—		—			(19	)		13	—		—
TOTAL NIKE, INC. REVENUES	$	12,429		$	12,390	0	%	0	%	$	38,756		$	38,392	1	%	1	%
TOTAL NIKE BRAND
Footwear	$	8,162		$	7,970	2	%	3	%	$	25,190		$	24,588	2	%	2	%
Apparel		3,290			3,381	-3	%	-3	%		10,452			10,609	-1	%	-2	%
Equipment		487			403	21	%	20	%		1,497			1,297	15	%	14	%
Global Brand Divisions2		9			12	-25	%	-22	%		34			44	-23	%	-24	%
TOTAL NIKE BRAND REVENUES	$	11,948		$	11,766	2	%	2	%	$	37,173		$	36,538	2	%	2	%
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)
	THREE MONTHS ENDED						%		NINE MONTHS ENDED						%
(Dollars in millions)	2/29/2024			2/28/2023			Change		2/29/2024			2/28/2023			Change
North America	$	1,400		$	1,190		18	%	$	4,360		$	4,064		7	%
Europe, Middle East & Africa		734			785		-6	%		2,591			2,750		-6	%
Greater China		722			702		3	%		1,761			1,754		0	%
Asia Pacific & Latin America		471			485		-3	%		1,406			1,470		-4	%
Global Brand Divisions2		(1,199	)		(1,160	)	-3	%		(3,572	)		(3,573	)	0	%
TOTAL NIKE BRAND1		2,128			2,002		6	%		6,546			6,465		1	%
Converse		98			164		-40	%		380			526		-28	%
Corporate3		(874	)		(696	)	-26	%		(2,060	)		(2,014	)	-2	%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1		1,352			1,470		-8	%		4,866			4,977		-2	%
EBIT margin1		10.9	%		11.9	%				12.6	%		13.0	%
Interest expense (income), net		(52	)		(7	)	—			(108	)		22		—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,404		$	1,477		-5	%	$	4,974		$	4,955		0	%
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. 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 financial information that should be considered when assessing the Company’s underlying business performance and trends. EBIT margin is calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. 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. For the three and nine months ended February 29, 2024, Corporate includes the restructuring charges, recognized as a result of the Company taking steps to streamline the organization. These charges primarily reflect employee severance costs.

NIKE, Inc.
DILUTED EARNINGS PER SHARE
(Unaudited)
	THREE MONTHS ENDED			NINE MONTHS ENDED
	2/29/2024			2/29/2024
DILUTED EARNINGS PER SHARE (GAAP):	$	0.77		$	2.74
Add: Restructuring charges		0.26			0.26
Tax effect of the restructuring charges1		(0.05	)		(0.05	)
DILUTED EARNINGS PER SHARE EXCLUDING RESTRUCTURING CHARGES (NON-GAAP)2:	$	0.98		$	2.95
1 Tax effect was determined by applying the tax rate applicable to the specific item.
2 Diluted earnings per share excluding the restructuring charges is a non-GAAP financial measure. The most comparable GAAP measure is Diluted earnings per share. The Company uses Diluted earnings per share excluding the restructuring charges to facilitate the evaluation of the Company’s performance. The Company believes that providing Diluted earnings per share excluding the impacts of the restructuring charges is useful to investors for comparability between periods and allows investors to evaluate the impacts of the restructuring charges separately. For the three and nine months ended February 28, 2023, there were no material restructuring charges impacting comparability.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240321992075/en/

Investor Contact:

Paul Trussell

investor.relations@nike.com

Media Contact:

Virginia Rustique-Petteni

media.relations@nike.com

Source: NIKE, Inc.

FAQ

What were NIKE's third-quarter revenues for fiscal 2024?

NIKE reported third-quarter revenues of $12.4 billion.

How did NIKE's gross margin change in the third quarter?

NIKE's gross margin increased to 44.8% in the third quarter.

What was NIKE's net income in the third quarter?

NIKE's net income was $1.2 billion in the third quarter.

Did NIKE increase its dividend payouts in the third quarter?

Yes, NIKE increased its dividend payouts by 6% in the third quarter.

How much did NIKE return to shareholders in the third quarter?

NIKE returned approximately $1.4 billion to shareholders in the third quarter.