NIKE(NKE) - 2024 Q3 - Quarterly Report

Revenue Performance - NIKE, Inc. revenues for Q3 fiscal 2024 were $12.43 billion, flat compared to$ 12.39 billion in Q3 fiscal 2023 on a currency-neutral basis[78][84] - NIKE, Inc. revenues for the first nine months of fiscal 2024 were $38.8 billion, a 1% increase compared to the same period in fiscal 2023, driven by growth in Greater China and APLA, each contributing approximately 1 percentage point, while Converse revenues reduced overall revenues by approximately 1 percentage point[85] - Total NIKE, Inc. revenues for the three months ended February 29, 2024, were$ 12.429 billion, a 0% change compared to $12.390 billion in the same period last year[97][100] - Total revenues increased by 3% to$ 1,647 million in February 2024 compared to $1,601 million in February 2023, with a 6% increase over the nine-month period to$ 5,024 million[114] NIKE Direct Revenues - NIKE Direct revenues reached $5.4 billion in Q3 fiscal 2024, representing 45% of total NIKE Brand revenues[78] - NIKE Direct revenues increased 4% to$ 16.5 billion for the first nine months of fiscal 2024, driven by a 6% growth in comparable store sales and new store additions[87] - NIKE Direct revenues in North America increased 2% to $2.630 billion, driven by 1% comparable store sales growth and 1% digital sales growth[103][104] - NIKE Direct revenues increased by 3% to$ 708 million in February 2024 compared to $688 million in February 2023, with an 8% increase over the nine-month period to$ 2,097 million[114] Gross Margin and Profitability - Gross margin increased by 150 basis points to 44.8% in Q3 fiscal 2024, driven by strategic pricing actions and lower logistics costs[78] - Gross margin for the first nine months of fiscal 2024 increased by 100 basis points to 44.5%, primarily due to higher NIKE Brand full-price ASP and lower other costs[88] - Reported EBIT increased 18% with gross margin expansion of 290 basis points due to higher full-price ASP and lower product costs, partially offset by higher product input costs[105] - Gross margin contracted by approximately 190 basis points in the third quarter of fiscal 2024, primarily due to unfavorable foreign currency exchange rates and lower NIKE Direct margin[116] Inventory and Cost Management - Inventories decreased by 9% to $7.7 billion as of February 29, 2024, compared to May 31, 2023[78] - Selling and administrative expenses increased by 2% in the third quarter of fiscal 2024, driven by higher demand creation and operating overhead expenses[116] - Operating overhead expense increased 3% to$ 9.294 billion for the first nine months of fiscal 2024, primarily due to restructuring charges, partially offset by lower technology spend and wage-related expenses[89][90] Regional Performance - North America revenues increased 3% on a currency-neutral basis to $5.070 billion, driven by growth in Kids', Men's, Women's, and Jordan Brand categories[100][104] - Greater China revenues decreased 3% on a currency-neutral basis to$ 2.084 billion, while Asia Pacific & Latin America revenues increased 3% to $1.647 billion[100] - Greater China revenues increased 6% on a currency-neutral basis, with Wholesale revenues up 12% and NIKE Direct revenues down 1% due to a 13% decline in digital sales[110] - APLA revenues increased by 4% on a currency-neutral basis in the third quarter of fiscal 2024, driven by growth in CASA, Mexico, Japan, and Southeast Asia & India[116] Product Category Performance - NIKE Brand footwear revenues grew 3% on a currency-neutral basis, with unit sales increasing 2% and higher ASP contributing 1 percentage point[84] - NIKE Brand apparel revenues declined 3% on a currency-neutral basis, with unit sales down 8% but higher ASP contributing 5 percentage points[84] - NIKE Brand footwear revenues increased 2% on a currency-neutral basis, with higher ASP per pair contributing approximately 4 percentage points of growth, despite a 2% decline in unit sales[85] - NIKE Brand apparel revenues decreased 2% on a currency-neutral basis, with unit sales down 12%, but higher ASP per unit contributed approximately 10 percentage points of revenue growth[85] - Footwear revenues in North America increased 4% on a currency-neutral basis to$ 3.460 billion, with unit sales up 7% but ASP per pair down 3%[103][104] - Apparel revenues in North America decreased 1% on a currency-neutral basis to $1.408 billion, with unit sales down 5% but ASP per unit up 4%[103][104] - Footwear revenues in Greater China increased 5% on a currency-neutral basis, with unit sales up 9% but lower ASP per pair reducing revenues by 4 percentage points[110] - Apparel revenues in Greater China increased 10% on a currency-neutral basis, with unit sales up 10% and ASP per unit flat[110] - Footwear revenues decreased by 1% on a currency-neutral basis, with unit sales down 8% but higher ASP per pair contributing 7 percentage points of revenue growth[105] - Apparel revenues decreased by 1% on a currency-neutral basis, with unit sales down 10% but higher ASP per unit contributing 9 percentage points of revenue growth[105] - Footwear revenues increased by 5% to$ 1,195 million in February 2024 compared to $1,141 million in February 2023, with a 10% increase over the nine-month period to$ 3,639 million[114] - Apparel revenues decreased by 4% to $390 million in February 2024 compared to$ 407 million in February 2023, with a 5% decrease over the nine-month period to $1,198 million[114] Converse Performance - Converse revenues decreased 19% to$ 495 million, with a 40% decline in EBIT to $98 million[100][102] - Converse revenues decreased by 20% on a currency-neutral basis in the third quarter of fiscal 2024, driven by declines in North America, Western Europe, and Asia[120] - Total revenues decreased by 19% to$ 495 million, with footwear revenues down 21% to $426 million and apparel revenues down 14% to$ 25 million[121] Shareholder Returns and Share Repurchases - The company returned $1.4 billion to shareholders in Q3 fiscal 2024 through share repurchases and dividends[78] - Repurchased 30.3 million shares of NIKE's Class B Common Stock for$ 3,206 million (average price of $105.70 per share) in the first nine months of fiscal 2024 under the$ 18 billion share repurchase plan[134] - As of February 29, 2024, repurchased 73.8 million shares at a cost of approximately $8.0 billion (average price of$ 108.46 per share) under the $18 billion share repurchase program[134] Financial Expenses and Taxes - Pre-tax charges of$ 450 million are expected for workforce reduction, with $403 million incurred in Q3 fiscal 2024[80] - Demand creation expense increased 8% to$ 3.194 billion for the first nine months of fiscal 2024, reflecting higher advertising, sports marketing, and digital marketing expenses[89][90] - Other (income) expense, net decreased to $101 million for the first nine months of fiscal 2024, compared to$ 283 million in the prior year, primarily due to unfavorable foreign currency conversion gains and losses[91] - The effective tax rate for the first nine months of fiscal 2024 was 15.6%, down from 18.5% in the prior year, primarily due to one-time benefits related to U.S. foreign tax credit regulations[93][94] - Corporate loss before interest and taxes increased by 26% to $874 million, driven by restructuring charges and unfavorable foreign currency impacts[123] Cash Flow and Financing - Cash provided by operations increased to$ 4,810 million for the first nine months of fiscal 2024, up from $3,588 million in the prior year, driven by favorable changes in working capital[132] - Cash used in financing activities decreased to$ 4,468 million for the first nine months of fiscal 2024, compared to $5,266 million in the prior year, due to lower share repurchases[132] - Entered into a 364-day committed credit facility agreement on March 8, 2024, providing up to$ 1 billion of borrowings, with an option to increase to $1.5 billion[135] - Cash and equivalents and Short-term investments totaled$ 10.6 billion as of February 29, 2024, with a weighted average days to maturity of 69 days[135] Foreign Currency and Hedging - Foreign currency fluctuations had a negative impact of $16 million on revenues and a positive impact of$ 20 million on income before taxes for the three months ended February 29, 2024[130] - The company's foreign exchange risk management program aims to mitigate the impact of currency fluctuations on consolidated results, with no material changes to the hedging strategy[127] - Transactional foreign currency exposures include product costs, non-functional currency denominated sales, and other costs, which are managed through currency forward and option contracts[128][129] - Translational exposures are managed by using U.S. Dollar denominated investments and hedging instruments to partially offset the impact of foreign currency translation on net earnings[131] - The company's hedging policy is designed to partially or entirely offset the impact of exchange rate changes on underlying net exposures, with no speculative use of derivative instruments[127] Corporate and Legal Matters - Obligations under endorsement contracts as of February 29, 2024, were $9.9 billion, with$ 1.6 billion payable within 12 months[136] - No off-balance sheet arrangements as of February 29, 2024, that have a material effect on financial condition[137] - No material changes in market risk disclosures from the Annual Report on Form 10-K for the fiscal year ended May 31, 2023[141]