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NIKE(NKE) - 2024 Q1 - Quarterly Report
NKENIKE(NKE)2023-10-06 20:22
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Revenue Performance - NIKE, Inc. revenues for Q1 fiscal 2024 were 12.9billion,a212.9 billion, a 2% increase year-over-year on both reported and currency-neutral basis[68] - NIKE Direct revenues grew 6% to 5.4 billion, representing 43% of total NIKE Brand revenues for Q1 fiscal 2024[68] - NIKE Brand footwear revenues increased 4% on a currency-neutral basis, driven by higher revenues in Jordan Brand, Women's, and Men's categories[76] - NIKE Brand apparel revenues decreased 1% on a currency-neutral basis, with unit sales down 12% but offset by higher average selling prices[76] - NIKE Brand Digital sales grew 2% to 2.9billioninQ1fiscal2024comparedto2.9 billion in Q1 fiscal 2024 compared to 2.8 billion in Q1 fiscal 2023[76] - Comparable store sales increased 8% on a currency-neutral basis, contributing to NIKE Direct revenue growth[76] - North America revenues decreased by 2% to 5,423millioninQ12024,withNIKEDirectrevenuesincreasingby75,423 million in Q1 2024, with NIKE Direct revenues increasing by 7% and wholesale revenues decreasing by 8%[85][88] - Europe, Middle East & Africa revenues increased by 8% to 3,610 million in Q1 2024, driven by a 12% increase in footwear revenues and a 27% increase in equipment revenues[90] - Greater China revenues increased by 5% to 1,735millioninQ12024,witha121,735 million in Q1 2024, with a 12% increase excluding currency changes[85] - Asia Pacific & Latin America revenues increased by 2% to 1,572 million in Q1 2024, with a 3% increase excluding currency changes[85] - Converse revenues decreased by 9% to 588millioninQ12024[85]−EMEArevenuesincreased6588 million in Q1 2024[85] - EMEA revenues increased 6% on a currency-neutral basis, with NIKE Direct revenues up 6% due to 14% comparable store sales growth, partially offset by a 2% decline in digital sales[91] - Greater China revenues increased 12% on a currency-neutral basis, with NIKE Direct revenues up 10% driven by 7% comparable store sales growth and 6% digital sales growth[94] - APLA revenues increased 3% on a currency-neutral basis, with NIKE Direct revenues up 3% due to 12% comparable store sales growth, partially offset by a 3% decline in digital sales[96] - Footwear revenues in Greater China increased 11% on a currency-neutral basis, with unit sales up 9% and ASP contributing 2 percentage points of growth[94] - Apparel revenues in Greater China increased 14% on a currency-neutral basis, with unit sales down 2% but ASP contributing 16 percentage points of growth[94] - Converse revenues decreased 9% on a currency-neutral basis, with direct to consumer revenues down 14% and wholesale revenues down 5%[100] Profitability and Margins - Gross margin decreased by 10 basis points to 44.2% in Q1 fiscal 2024, primarily due to higher product costs and unfavorable foreign currency exchange rates[68] - EBIT margin for Q1 fiscal 2024 was 12.5%, down from 14.5% in Q1 fiscal 2023[71] - Gross margin decreased by 10 basis points to 44.2% in Q1 2024, primarily due to higher NIKE Brand product costs, unfavorable foreign currency exchange rates, and lower off-price margin, partially offset by higher full-price ASP and NIKE Direct margin[77] - Total NIKE, Inc. EBIT decreased by 12% to 1,614 million in Q1 2024, with an EBIT margin of 12.5%[86] - Reported EBIT in Greater China decreased 3%, with gross margin contraction of 80 basis points due to higher product costs and unfavorable currency changes[94] - Reported EBIT in APLA decreased 17%, with gross margin contraction of 410 basis points due to higher product costs and unfavorable currency changes[96] - Converse reported EBIT decreased 20%, with gross margin contraction of 200 basis points due to promotional activity and unfavorable currency changes[100] - Global Brand Divisions' loss before interest and taxes increased 2%, primarily due to higher advertising and marketing expenses[99] Expenses - Demand creation expense increased by 13% to 1,069millioninQ12024,drivenbyhigheradvertisingandmarketingexpenses[79][80]−Operatingoverheadexpenseincreasedby21,069 million in Q1 2024, driven by higher advertising and marketing expenses[79][80] - Operating overhead expense increased by 2% to 3,047 million in Q1 2024, primarily due to higher wage-related expenses and NIKE Direct variable costs[79][80] - Corporate revenues primarily consist of foreign currency hedge gains and losses, with a loss before interest and taxes increasing by 77millioninQ1fiscal2024,drivenbyunfavorablechangesinforeigncurrencyremeasurementandincreasedwage−relatedexpenses[102]InventoryandWorkingCapital−InventoriesasofAugust31,2023,were77 million in Q1 fiscal 2024, driven by unfavorable changes in foreign currency remeasurement and increased wage-related expenses[102] Inventory and Working Capital - Inventories as of August 31, 2023, were 8.7 billion, a 3% increase compared to May 31, 2023[68] - The net change in working capital resulted in a decrease to Cash provided by operations of 1,823millionforthefirstthreemonthsoffiscal2024,primarilyduetounfavorablechangesinAccruedliabilitiesandAccountsreceivable[109]ShareholderReturnsandShareRepurchases−Thecompanyreturned1,823 million for the first three months of fiscal 2024, primarily due to unfavorable changes in Accrued liabilities and Accounts receivable[109] Shareholder Returns and Share Repurchases - The company returned 1.7 billion to shareholders through share repurchases and dividends in Q1 fiscal 2024[68] - The company repurchased 10.5 million shares of NIKE's Class B Common Stock for 1,132millioninQ1fiscal2024,aspartofan1,132 million in Q1 fiscal 2024, as part of an 18 billion share repurchase plan[109] Cash Flow and Financial Position - Cash provided by operations was an outflow of 66millionforthefirstthreemonthsoffiscal2024,comparedtoaninflowof66 million for the first three months of fiscal 2024, compared to an inflow of 357 million for the same period in fiscal 2023[109] - As of August 31, 2023, the company had Cash and equivalents and Short-term investments totaling 8.8billion,withaweightedaveragedaystomaturityof100days[110]−Thecompany′scommittedcreditfacilitiesremainunchanged,withnoamountsoutstandingasofAugust31,2023,anditmaintainslong−termdebtratingsofAA−andA1fromStandardandPoor′sandMoody′s,respectively[110]ForeignExchangeImpact−Theimpactofforeignexchangeratefluctuationsonthetranslationofconsolidatedrevenueswasadetrimentof8.8 billion, with a weighted average days to maturity of 100 days[110] - The company's committed credit facilities remain unchanged, with no amounts outstanding as of August 31, 2023, and it maintains long-term debt ratings of AA- and A1 from Standard and Poor's and Moody's, respectively[110] Foreign Exchange Impact - The impact of foreign exchange rate fluctuations on the translation of consolidated revenues was a detriment of 57 million for the three months ended August 31, 2023[107] - The impact of foreign exchange rate fluctuations on Income before income taxes was a detriment of 2millionforthethreemonthsendedAugust31,2023[107]−Thecompanyestimatesanunfavorableimpactof2 million for the three months ended August 31, 2023[107] - The company estimates an unfavorable impact of 65 million in Income before income taxes due to translation of foreign currency-denominated profits and foreign currency-related gains and losses for the three months ended August 31, 2023[108] - The company's foreign exchange risk management program aims to lessen the effects of currency fluctuations, with no material changes to the hedging program or strategy as of August 31, 2023[103] Tax Rate - Effective tax rate decreased by 770 basis points to 12.0% in Q1 2024, primarily due to a one-time benefit from the delay of certain U.S. foreign tax credit regulations[83]