NIKE, Inc. Reports Fiscal 2023 Second Quarter Results

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

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Martedì, Dicembre 20, 2022

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OREGON, UNITED STATES, NORTH AMERICA, ASIA, NIKE

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NIKE, NIKE, INC.

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NYSE:NKE

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NIKE, Inc. (NYSE:NKE) today reported fiscal 2023 financial results for its second quarter ended November 30, 2022.
These results give us confidence in delivering the year as our competitive advantages continue to fuel our momentum.
In the second quarter, NIKE returned approximately $2.1 billion to shareholders, including:
Dividends of $480 million, up 10 percent from the prior year.
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.

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						%
(In millions, except per share data)	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
(Dollars in millions)	2022		2021		% Change
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					%
(Dollars in millions)	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						%
(Dollars in millions)	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%
¹The 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.
²Global 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.

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