Business Wire | Sep 23, 2021 04:15PM EDT

NIKE, Inc. Reports Fiscal 2022 First Quarter Results

Sep. 23, 2021

BEAVERTON, Ore.--(BUSINESS WIRE)--Sep. 23, 2021--NIKE, Inc. (NYSE:NKE) today reported fiscal 2022 financial results for its first quarter ended August 31, 2021.

* First quarter reported revenues were $12.2 billion, up 16 percent compared to prior year and up 12 percent on a currency-neutral basis.* * NIKE Direct sales were $4.7 billion, up 28 percent on a reported basis and up 25 percent on a currency-neutral basis. * NIKE Brand Digital sales increased 29 percent, or 25 percent on a currency-neutral basis. * Gross margin increased 170 basis points to 46.5 percent. * Diluted earnings per share for the quarter was $1.16, up 22 percent.

"NIKE's strong results this quarter are continued proof of our deep consumer connections, unrelenting innovation pipeline and a digital advantage that fuels our brand momentum," said John Donahoe, President and CEO, NIKE, Inc. "We have the right playbook to navigate macroeconomic dynamics, as we create value through our relentless drive to fuel the future of sport."**

First Quarter revenues increased 12 percent, on a currency-neutral basis, with growth across all channels, led by NIKE Direct growth of 25 percent. Contributing to NIKE Direct growth was the steady normalization of owned physical retail, which grew 24 percent, exceeding pre-pandemic levels from the first quarter of fiscal 2020. NIKE Brand Digital business continued strong growth, increasing by 25 percent, led by North America growth of 43 percent.

"NIKE is a growth company with a market opportunity as large as it's ever been," said Matt Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. "Our Q1 results illustrate how NIKE's Consumer Direct Acceleration strategy continues to fuel growth and transform our long-term financial model."**

First Quarter Income Statement Review

* Revenues for NIKE, Inc. increased 16 percent to $12.2 billion compared to the prior year, up 12 percent on a currency-neutral basis. Revenues for the NIKE Brand were $11.6 billion, an increase of 12 percent to prior year on a currency-neutral basis, led by NIKE Direct double-digit growth in North America, APLA and EMEA. Revenues for Converse were $629 million, up 7 percent on a currency-neutral basis, led by performance in Direct to consumer in both North America and Europe. * Gross margin increased 170 basis points to 46.5 percent, led by margin expansion in our NIKE Direct business, a higher mix of full-price sales and favorable changes in foreign currency exchange rates, partially offset by higher product costs primarily due to increased freight costs. * Selling and administrative expense increased 20 percent to $3.6 billion. Demand creation expense was $918 million, up 36 percent, primarily due to normalization of spend against brand campaigns as we annualize marketplace closures in the prior year, as well as continued investments in digital marketing to support heightened digital demand. Operating overhead expense increased 15 percent to $2.7 billion, primarily due to an increase in wage-related expenses, higher strategic technology investments and NIKE Direct variable costs. * The effective tax rate for the quarter was 11.0 percent compared to 11.5 percent for the same period last year, due to increased benefits from stock-based compensation and discrete items, offset by a shift in our earnings mix. * Net income was $1.9 billion, up 23 percent, and Diluted earnings per share was $1.16, increasing 22 percent.

August 31, 2021 Balance Sheet Review

* Inventories for NIKE, Inc. were $6.7 billion, flat compared to the prior year period, driven by strong consumer demand during the quarter, offset by elevated in-transit inventories due to extended lead times from ongoing supply chain disruptions. * Cash and equivalents and short-term investments were $13.7 billion, up approximately $4.2 billion from last year, due to strong free cash flow generation, partially offset by cash dividends and share repurchases.

Shareholder Returns

NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 19 consecutive years of increasing dividend payouts. In the first quarter, NIKE returned approximately $1.2 billion to shareholders, including:

* Dividends of $435 million, up 13 percent from the prior year. * Share repurchases of $742 million for the quarter, reflecting 4.8 million shares retired as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of August 31, 2021, a total of 54.8 million shares have been repurchased under the program for a total of approximately $5.4 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on September 23, 2021, to review fiscal first 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 9:00 p.m. PT, October 14, 2021.

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://news.nike.com 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)

THREE MONTHS ENDED

%

(In millions, except per share data)

8/31/2021

8/31/2020

Change

Revenues

$

12,248

$

10,594

16

%

Cost of sales

6,552

5,853

12

%

Gross profit

5,696

4,741

20

%

Gross margin

46.5

%

44.8

%

Demand creation expense

918

677

36

%

Operating overhead expense

2,654

2,298

15

%

Total selling and administrative expense

3,572

2,975

20

%

% of revenues

29.2

%

28.1

%

Interest expense (income), net

57

65

-

Other (income) expense, net

(39

)

(14

)

-

Income before income taxes

2,106

1,715

23

%

Income tax expense

232

197

18

%

Effective tax rate

11.0

%

11.5

%

NET INCOME

$

1,874

$

1,518

23

%

Earnings per common share:

Basic

$

1.18

$

0.97

22

%

Diluted

$

1.16

$

0.95

22

%

Weighted average common shares outstanding:

Basic

1,581.9

1,561.8

Diluted

1,619.6

1,593.3

Dividends declared per common share

$

0.275

$

0.245

NIKE, Inc.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



THREE MONTHS ENDED %

(In millions, except per share data) 8/31/2021 8/31/2020 Change

Revenues $ 12,248 $ 10,594 16 %

Cost of sales 6,552 5,853 12 %

Gross profit 5,696 4,741 20 %

Gross margin 46.5 % 44.8 %



Demand creation expense 918 677 36 %

Operating overhead expense 2,654 2,298 15 %

Total selling and administrative expense 3,572 2,975 20 %

% of revenues 29.2 % 28.1 %



Interest expense (income), net 57 65 -

Other (income) expense, net (39 ) (14 ) -

Income before income taxes 2,106 1,715 23 %

Income tax expense 232 197 18 %

Effective tax rate 11.0 % 11.5 %



NET INCOME $ 1,874 $ 1,518 23 %



Earnings per common share:

Basic $ 1.18 $ 0.97 22 %

Diluted $ 1.16 $ 0.95 22 %



Weighted average common shares outstanding:

Basic 1,581.9 1,561.8

Diluted 1,619.6 1,593.3



Dividends declared per common share $ 0.275 $ 0.245

NIKE, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

August 31,

August 31,

% Change

(Dollars in millions)

2021

2020

ASSETS

Current assets:

Cash and equivalents

$

10,720

$

8,148

32

%

Short-term investments

2,975

1,332

123

%

Accounts receivable, net

4,341

3,813

14

%

Inventories

6,699

6,705

0

%

Prepaid expenses and other current assets

1,655

1,939

-15

%

Total current assets

26,390

21,937

20

%

Property, plant and equipment, net

4,869

4,969

-2

%

Operating lease right-of-use assets, net

3,078

3,158

-3

%

Identifiable intangible assets, net

267

272

-2

%

Goodwill

242

223

9

%

Deferred income taxes and other assets

3,071

2,699

14

%

TOTAL ASSETS

$

37,917

$

33,258

14

%

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

-

$

1

-100

%

Notes payable

15

137

-89

%

Accounts payable

2,135

1,983

8

%

Current portion of operating lease liabilities

462

459

1

%

Accrued liabilities

5,296

5,742

-8

%

Income taxes payable

361

297

22

%

Total current liabilities

8,269

8,619

-4

%

Long-term debt

9,415

9,408

0

%

Operating lease liabilities

2,898

2,961

-2

%

Deferred income taxes and other liabilities

2,992

3,046

-2

%

Redeemable preferred stock

-

-

-

Shareholders' equity

14,343

9,224

55

%

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

37,917

$

33,258

14

%

NIKE, Inc.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



August 31, August 31, % Change(Dollars in millions) 2021 2020

ASSETS

Current assets:

Cash and equivalents $ 10,720 $ 8,148 32 %

Short-term investments 2,975 1,332 123 %

Accounts receivable, net 4,341 3,813 14 %

Inventories 6,699 6,705 0 %

Prepaid expenses and other current assets 1,655 1,939 -15 %

Total current assets 26,390 21,937 20 %

Property, plant and equipment, net 4,869 4,969 -2 %

Operating lease right-of-use assets, net 3,078 3,158 -3 %

Identifiable intangible assets, net 267 272 -2 %

Goodwill 242 223 9 %

Deferred income taxes and other assets 3,071 2,699 14 %

TOTAL ASSETS $ 37,917 $ 33,258 14 %

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt $ - $ 1 -100 %

Notes payable 15 137 -89 %

Accounts payable 2,135 1,983 8 %

Current portion of operating lease liabilities 462 459 1 %

Accrued liabilities 5,296 5,742 -8 %

Income taxes payable 361 297 22 %

Total current liabilities 8,269 8,619 -4 %

Long-term debt 9,415 9,408 0 %

Operating lease liabilities 2,898 2,961 -2 %

Deferred income taxes and other liabilities 2,992 3,046 -2 %

Redeemable preferred stock - - -

Shareholders' equity 14,343 9,224 55 %

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 37,917 $ 33,258 14 %

NIKE, Inc.

DIVISIONAL REVENUES

(Unaudited)

% Change Excluding Currency Changes1

THREE MONTHS ENDED

%

(Dollars in millions)

8/31/2021

8/31/2020

Change

North America

Footwear

$

3,264

$

2,957

10

%

10

%

Apparel

1,430

1,125

27

%

27

%

Equipment

185

143

29

%

29

%

Total

4,879

4,225

15

%

15

%

Europe, Middle East & Africa

Footwear

1,983

1,802

10

%

4

%

Apparel

1,159

971

19

%

13

%

Equipment

165

137

20

%

15

%

Total

3,307

2,910

14

%

8

%

Greater China

Footwear

1,449

1,251

16

%

6

%

Apparel

476

478

0

%

-9

%

Equipment

57

51

12

%

3

%

Total

1,982

1,780

11

%

1

%

Asia Pacific & Latin America

Footwear

1,022

758

35

%

33

%

Apparel

385

301

28

%

26

%

Equipment

58

40

45

%

44

%

Total

1,465

1,099

33

%

31

%

Global Brand Divisions2

7

4

75

%

38

%

TOTAL NIKE BRAND

11,640

10,018

16

%

12

%

Converse

629

563

12

%

7

%

Corporate3

(21

)

13

-

-

TOTAL NIKE, INC. REVENUES

$

12,248

$

10,594

16

%

12

%

TOTAL NIKE BRAND

Footwear

$

7,718

$

6,768

14

%

10

%

Apparel

3,450

2,875

20

%

16

%

Equipment

465

371

25

%

22

%

Global Brand Divisions2

7

4

75

%

38

%

TOTAL NIKE BRAND REVENUES

$

11,640

$

10,018

16

%

12

%

NIKE, Inc.

DIVISIONAL REVENUES

(Unaudited)



% Change Excluding THREE MONTHS ENDED % Currency Changes^1(Dollars in millions) 8/31/2021 8/31/2020 Change

North America

Footwear $ 3,264 $ 2,957 10 % 10 %

Apparel 1,430 1,125 27 % 27 %

Equipment 185 143 29 % 29 %

Total 4,879 4,225 15 % 15 %

Europe, Middle East & Africa

Footwear 1,983 1,802 10 % 4 %

Apparel 1,159 971 19 % 13 %

Equipment 165 137 20 % 15 %

Total 3,307 2,910 14 % 8 %

Greater China

Footwear 1,449 1,251 16 % 6 %

Apparel 476 478 0 % -9 %

Equipment 57 51 12 % 3 %

Total 1,982 1,780 11 % 1 %

Asia Pacific & Latin America

Footwear 1,022 758 35 % 33 %

Apparel 385 301 28 % 26 %

Equipment 58 40 45 % 44 %

Total 1,465 1,099 33 % 31 %

Global Brand Divisions^2 7 4 75 % 38 %

TOTAL NIKE BRAND 11,640 10,018 16 % 12 %

Converse 629 563 12 % 7 %

Corporate^3 (21 ) 13 - -

TOTAL NIKE, INC. REVENUES $ 12,248 $ 10,594 16 % 12 %



TOTAL NIKE BRAND

Footwear $ 7,718 $ 6,768 14 % 10 %

Apparel 3,450 2,875 20 % 16 %

Equipment 465 371 25 % 22 %

Global Brand Divisions^2 7 4 75 % 38 %

TOTAL NIKE BRAND REVENUES $ 11,640 $ 10,018 16 % 12 %

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.

^1 The percent change has been calculated using actual exchange rates in useduring the comparative prior year period and is provided to enhance thevisibility of the underlying business trends by excluding the impact oftranslation arising from foreign currency exchange rate fluctuations, which isconsidered a non-GAAP financial measure. Management uses this non-GAAPfinancial measure when evaluating the Company's performance, including whenmaking financial and operating decisions. Additionally, management believesthis non-GAAP financial measure provides investors with additional financialinformation that should be considered when assessing the Company's underlyingbusiness performance and trends. References to this measure should not beconsidered in isolation or as a substitute for other financial measurescalculated and presented in accordance with U.S. GAAP and may not be comparableto similarly titled non-GAAP measures used by other companies.

^2 Global Brand Divisions revenues include NIKE Brand licensing and othermiscellaneous revenues that are not part of a geographic operating segment.

^3 Corporate revenues primarily consist of foreign currency hedge gains andlosses related to revenues generated by entities within the NIKE Brandgeographic operating segments and Converse, but managed through the Company'scentral foreign exchange risk management program.

NIKE, Inc.

EARNINGS BEFORE INTEREST AND TAXES1

(Unaudited)

THREE MONTHS ENDED

%

(Dollars in millions)

8/31/2021

8/31/2020

Change

North America

$

1,434

$

1,302

10

%

Europe, Middle East & Africa

875

692

26

%

Greater China

701

688

2

%

Asia Pacific & Latin America

481

280

72

%

Global Brand Divisions2

(987

)

(853

)

-16

%

TOTAL NIKE BRAND1

2,504

2,109

19

%

Converse

204

168

21

%

Corporate3

(545

)

(497

)

-10

%

TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1

2,163

1,780

22

%

EBIT margin1

17.7

%

16.8

%

Interest expense (income), net

57

65

-

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES

$

2,106

$

1,715

23

%

NIKE, Inc.

EARNINGS BEFORE INTEREST AND TAXES^1

(Unaudited)



THREE MONTHS ENDED %

(Dollars in millions) 8/31/2021 8/31/2020 Change

North America $ 1,434 $ 1,302 10 %

Europe, Middle East & Africa 875 692 26 %

Greater China 701 688 2 %

Asia Pacific & Latin America 481 280 72 %

Global Brand Divisions^2 (987 ) (853 ) -16 %

TOTAL NIKE BRAND^1 2,504 2,109 19 %

Converse 204 168 21 %

Corporate^3 (545 ) (497 ) -10 %

TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES^ 2,163 1,780 22 %1

EBIT margin^1 17.7 % 16.8 %

Interest expense (income), net 57 65 -

TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES $ 2,106 $ 1,715 23 %

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 and are being provided as management believes this additional information should be considered when assessing the Company's underlying business performance and trends. EBIT margin is calculated as 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.

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