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Earnings per share surge in NIKE fiscal 2017 third quarter

Fiscal 2017 Q3 Nike earnings

NIKE has reported financial results for its fiscal 2017 third quarter ended 28 February 2017. According to the company, consumer demand in all geographies drove revenue growth across the NIKE Brand portfolio. Diluted earnings per share were up 24% and grew faster than revenue, primarily due to ‘selling and administrative expense leverage, higher other income (net), a lower effective tax rate and a lower average share count.’

“The power of NIKE’s diverse, global portfolio delivered another solid quarter of growth and profitability,” said Mark Parker, Chairman, President and CEO at NIKE. “To expand our leadership and ignite NIKE’s next phase of growth, we’re delivering a relentless flow of innovation through performance and style, increasing speed throughout the business and creating more direct connections with consumers leveraging digital and membership.”

Revenues for NIKE Inc increased 5% to US$8.4 billion, up 7% on a currency-neutral basis. Revenues for the NIKE Brand were US$7.9 billion, up 7% on a currency-neutral basis, driven by double-digit growth in Western Europe, Greater China and emerging markets as well as the Sportswear and Jordan Brand categories. Revenues for Converse were US$498 million, up 3% on a currency-neutral basis, driven by growth in North America.

Gross margin contracted 140 basis points to 44.5%, as ‘higher average selling prices were more than offset by higher product costs, unfavourable changes in foreign exchange rates and the impact of higher off-price sales.’

Selling and administrative expense decreased 3% to US$2.5 billion. Demand creation expense was US$749 million, down 7% – as fiscal 2017 spend was weighted towards the first six months due to significant investments around the Olympics and the European Championships. Operating overhead expense decreased 1% to US$1.7 billion. Here, the company noted that ‘continued investments in Direct-to-Consumer (DTC) were offset by lower bad debt expense compared to the prior year and lower administrative costs as Edit-to-Amplify initiatives are driving productivity in core operational spending.’

Other income, net was US$88 million comprised primarily of net foreign currency exchange gains, and to a lesser extent, non-operating items.

Net income increased 20% to US$1.1 billion and diluted earnings per share increased 24% to US$0.68 – as revenue growth, selling and administrative expense leverage, higher other income (net), a lower tax rate and a three percent decline in the weighted average diluted common shares outstanding more than offset lower gross margin.

During the third quarter, NIKE repurchased a total of 8.9 million shares for approximately US$475 million as part of the four-year, US$12 billion share buy-back program approved by the company’s board of directors in November 2015. As of 28 February 2017, a total of 64.9 million shares had been repurchased under this program for approximately US$3.6 billion.




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