NIKE has reported fiscal 2019 financial results for its first quarter ended August 31, 2018. For the quarter, the company notes that double-digit revenue growth was driven by the continued success of the Consumer Direct Offense, which fuelled growth across all geographies as well as wholesale and NIKE Direct, led by digital.
“NIKE’s Consumer Direct Offense, combined with our deep line up of innovation, is driving strong momentum and balanced growth across our entire business,” said Mark Parker, Chairman, President and CEO at NIKE. “Our expanded digital capabilities are accelerating our complete portfolio and creating value across all dimensions as we connect with and serve consumers.”
- NIKE’s Q1 2019 fiscal revenues increased 10% to US$9.9 billion, +9% on a currency-neutral basis.
- Revenues for the NIKE Brand were US$9.4 billion, +10 on a currency-neutral basis – driven by double-digit growth internationally and in NIKE Direct, strong momentum in North America, and growth in almost every category led by Sportswear.
- Gross margin increased 50 basis points to 44.2% primarily due to higher average selling prices, favourable full-price sales mix and margin expansion in NIKE Direct, partially offset by higher product costs.
- Selling and administrative expense increased 7% to US$3.1 billion. Demand creation expense was US$964 million, up 13% primarily driven by ‘sports marketing investments, brand campaigns and key sports moments’.
- Operating overhead expense increased 5% to US$2.1 billion, driven by investments in capabilities to drive the Consumer Direct Offense, particularly in NIKE Direct and global operations.
- Diluted earnings per share for the quarter were US$0.67, an increase of 18% year on year, driven by ‘strong revenue growth, gross margin expansion, selling and administrative expense leverage, and a lower average share count, partially offset by a higher effective tax rate.’
“We are delivering stronger global growth and profitability than we anticipated entering this fiscal year,” said Andy Campion, Executive Vice President and Chief Financial Officer at NIKE. “While foreign exchange volatility has increased, our underlying currency-neutral momentum continues to build as we transform how NIKE operates, drives growth and creates value for our shareholders.”
Inventories for NIKE were US$5.2 billion, flat on the prior year. According to the company, this was primarily driven by a ‘clean marketplace with healthy inventories across all geographies due to strong full-price sell through on new innovation.’
During the first quarter, NIKE repurchased a total of 17.8 million shares for approximately US$1.4 billion as part of the four-year, US$12 billion program approved by the Board of Directors in November 2015.
As of August 31, 2018, a total of 167.2 million shares had been repurchased under this program for approximately US$10.1 billion. In June 2018, the Board of Directors authorized a new four-year US$15 billion share repurchase program that will commence upon the completion of the current program.