On June 27, 2024, Nike Inc (NKE, Financial) released its 8-K filing for the fiscal fourth quarter and full year ended May 31, 2024. Nike, the largest athletic footwear and apparel brand in the world, reported financial results that surpassed analyst estimates, showcasing resilience amidst market challenges.
Company Overview
Nike Inc (NKE, Financial) is the world's leading designer, marketer, and distributor of athletic footwear, apparel, equipment, and accessories. Key categories include basketball, running, and football (soccer). Footwear generates about two-thirds of its sales. Its brands include Nike, Jordan, and Converse. Nike sells products worldwide through company-owned stores, franchised stores, and third-party retailers, and operates e-commerce platforms in more than 40 countries. Nearly all its production is outsourced to contract manufacturers in over 30 countries. Nike was founded in 1964 and is based in Beaverton, Oregon.
Performance and Challenges
Nike Inc (NKE, Financial) reported fourth-quarter revenues of $12.6 billion, a 2% decline on a reported basis but flat on a currency-neutral basis. Despite the revenue dip, the company achieved a gross margin increase of 110 basis points to 44.7%, driven by strategic pricing actions and reduced logistics costs. However, Nike Direct revenues fell by 8% on a reported basis, reflecting challenges in digital sales and owned stores.
Matthew Friend, Executive Vice President & Chief Financial Officer, commented, "We are driving better balance across our portfolio. While we are encouraged by our progress, our fourth quarter results highlighted challenges that have led us to update our Fiscal '25 outlook. We are taking actions to reposition NIKE to be more competitive, and to drive sustainable, profitable long-term growth."
Financial Achievements
Nike Inc (NKE, Financial) reported a full-year revenue of $51.4 billion, a slight increase from $51.2 billion in the prior year, up 1% on a currency-neutral basis. The company's net income for the fourth quarter was $1.5 billion, up 45%, with diluted earnings per share (EPS) of $0.99, surpassing the analyst estimate of $0.84. For the full year, net income reached $5.7 billion, up 12%, with diluted EPS of $3.73, exceeding the annual estimate of $3.58.
Key Financial Metrics
| Metric | Q4 FY2024 | Q4 FY2023 | Change |
|---|---|---|---|
| Revenue | $12.6 billion | $12.8 billion | -2% |
| Gross Margin | 44.7% | 43.6% | +110 bps |
| Net Income | $1.5 billion | $1.0 billion | +45% |
| Diluted EPS | $0.99 | $0.66 | +50% |
Income Statement Highlights
For the fourth quarter, Nike Inc (NKE, Financial) reported a gross profit of $5.6 billion, up 1% from the previous year. The company's selling and administrative expenses decreased by 7% to $4.1 billion, with operating overhead expenses down by 9%. The effective tax rate for the quarter was 13.1%, compared to 17.3% in the prior year, contributing to the net income increase.
Balance Sheet and Cash Flow
As of May 31, 2024, Nike Inc (NKE, Financial) reported total assets of $38.1 billion, a 2% increase from the previous year. Inventories decreased by 11% to $7.5 billion, reflecting a decrease in units. Cash and equivalents and short-term investments totaled $11.6 billion, up $0.9 billion from last year. The company returned approximately $6.4 billion to shareholders through dividends and share repurchases during the fiscal year.
Analysis
Nike Inc (NKE, Financial)'s ability to exceed earnings expectations despite revenue challenges highlights its strategic pricing and cost management effectiveness. The increase in gross margin and net income indicates strong operational efficiency. However, the decline in Nike Direct revenues suggests potential areas for improvement in digital and retail strategies. The company's focus on balancing its portfolio and repositioning for competitiveness will be crucial for sustaining long-term growth.
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Explore the complete 8-K earnings release (here) from Nike Inc for further details.
