Nike, inc. reports fiscal 2023 second quarter results
Beaverton, ore.--(business wire)--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. 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. 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 % 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 2022 2021 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 % 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 % 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% 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. 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. 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.
