NIKE, Inc. Reports Fiscal 2024 Second Quarter Results

NIKE, Inc. (NYSE:NKE) today reported fiscal 2024 financial results for its second quarter ended November 30, 2023.

• Second quarter revenues were $13.4 billion, up 1 percent on a reported basis compared to the prior year and down 1 percent on a currency-neutral basis*
• NIKE Direct revenues were $5.7 billion, up 6 percent on a reported basis and up 4 percent on a currency-neutral basis
• NIKE Brand Digital sales increased 4 percent on a reported basis and 1 percent on a currency-neutral basis
• Wholesale revenues were $7.1 billion, down 2 percent on a reported basis and down 3 percent on a currency-neutral basis
• Gross margin increased 170 basis points to 44.6 percent
• Diluted earnings per share was $1.03 for the second quarter, up 21 percent
• NIKE, Inc. is announcing an enterprise initiative to accelerate future growth while building a faster, more efficient Nike**

“Our Q2 results demonstrated how we are getting back on our front foot in our key areas of innovation and growth,” said John Donahoe, President & CEO, NIKE, Inc. “This quarter showed strong execution by our team as we focus on our winning formula of innovative product, distinctive storytelling and differentiated marketplace experiences.”**

Matthew Friend, Executive Vice President & Chief Financial Officer, NIKE, Inc. said, “NIKE’s second-quarter financial performance was a turning point in driving more profitable growth. As we look ahead to a softer second-half revenue outlook, we remain focused on strong gross margin execution and disciplined cost management.”**

The company is identifying opportunities to deliver up to $2 billion in cumulative cost savings over the next three years. Areas of potential savings include simplifying our product assortment, increasing automation and use of technology, streamlining our organization, and leveraging our scale to drive greater efficiency.**

A majority of these savings will be invested to fuel future growth, accelerate innovation at speed and scale, and drive greater long-term profitability.**

As part of this commitment, the company is taking steps to streamline the organization, which is expected to result in pre-tax restructuring charges of approximately $400 million to $450 million that will largely be recognized in the third quarter of fiscal year 2024, primarily associated with employee severance costs. Revised guidance will be provided on the conference call.**

“We see an outstanding opportunity to drive long-term profitable growth,” said Donahoe. “Today we are embracing a company-wide journey to invest in our areas of greatest potential, increase the pace of our innovation, and accelerate our agility and responsiveness.”**

Second Quarter Income Statement Review

• Revenues for NIKE, Inc. increased 1 percent to $13.4 billion compared to the prior year and decreased 1 percent on a currency-neutral basis.
• Revenues for the NIKE Brand were $12.9 billion, up 1 percent compared to the prior year and flat on a currency-neutral basis, as currency-neutral growth in APLA and Greater China was offset by declines in North America and EMEA.
• Revenues for Converse were $519 million, down 11 percent compared to the prior year and down 13 percent on a currency-neutral basis, due to declines in North America and Europe, partially offset by growth in Asia.
• Gross margin increased 170 basis points to 44.6 percent, primarily driven by strategic pricing actions and lower ocean freight rates, partially offset by unfavorable changes in net foreign currency exchange rates and higher product input costs.
• Selling and administrative expense increased 1 percent to $4.1 billion.
• Demand creation expense was $1.1 billion, up 1 percent, reflecting an increase in marketing expense.
• Operating overhead expense was $3.0 billion, flat compared to the prior year as increases in NIKE Direct variable costs were offset by lower technology spend and wage-related expenses.
• The effective tax rate was 17.9 percent compared to 19.3 percent for the same period last year.
• Net income was $1.6 billion, up 19 percent, and Diluted earnings per share was $1.03, increasing 21 percent.

November 30, 2023 Balance Sheet Review

• Inventories for NIKE, Inc. were $8.0 billion, down 14 percent compared to the prior year, reflecting a decrease in units.
• Cash and equivalents and short-term investments were $9.9 billion, down approximately $0.7 billion from last year, as cash generated by operations was more than offset by share repurchases, cash dividends, capital expenditures and bond repayment.

Shareholder Returns

NIKE continues to have a strong track record of investing to fuel growth and consistently increasing returns to shareholders, including 22 consecutive years of increasing dividend payouts. In the second quarter, NIKE returned approximately $1.7 billion to shareholders, including:

• Dividends of $523 million, up 9 percent from the prior year.
• Share repurchases of $1.2 billion, reflecting 11.9 million shares retired as part of the company’s four-year, $18 billion program approved by the Board of Directors in June 2022. As of November 30, 2023, a total of 65.9 million shares have been repurchased under the program for a total of approximately $7.1 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 21, 2023, to review fiscal second quarter results. The conference call will be broadcast live via the Internet and can be accessed at https://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 11, 2024.