NIKE Brand futures orders up 15%; sees strong Q3
NIKE Inc reported financial results for its fiscal 2012 third quarter ended February 29, 2012. Earnings per share for the quarter rose 11 percent as a result of continued strong demand for NIKE Inc brands, SG&A expense leverage and a lower average share count, which more than offset the impact of a lower gross margin and a higher effective tax rate.
“We had a strong third quarter. Our relentless focus on innovation delivered powerful new products and services for athletes and consumers, and continues to drive value to our shareholders,” said Mark Parker, President and CEO, NIKE Inc. “The environment remains volatile, but I'm optimistic about the future. We're starting a great season of major sports events and we have a pipeline full of innovation to fuel growth over the long term."
Third Quarter Income Statement Review
• Revenues for NIKE, Inc. increased 15 percent to $5.8 billion, up 16 percent on a currency-neutral basis. Excluding the impacts of changes in foreign currency, NIKE Brand revenues rose 16 percent with growth in every geography except Japan and in all key categories. Revenues for Other Businesses increased 12 percent with minimal impact from changes in currency exchange rates; Converse, Hurley, NIKE Golf and Umbro all grew compared to the prior year while Cole Haan was essentially flat to last year.
• Gross margin declined 200 basis points to 43.8 percent due primarily to higher product costs, which more than offset the positive effects of price increases, growing sales in our Direct to Consumer operations, and ongoing product cost reduction initiatives.
• Selling and administrative expenses grew at a lower rate than revenue, up 10 percent to $1.8 billion. Demand creation expenses increased 6 percent to $615 million driven by marketing support for key product launches, sports marketing expense and investments in retail product presentation for wholesale accounts. Operating overhead expenses increased 12 percent to $1.2 billion due to additional investments made in our wholesale and Direct to Consumer businesses.
• Other income, net was $11 million, primarily comprised of net foreign exchange gains and other non-operating items. For the quarter, we estimate the year-over-year change in foreign currency related gains and losses included in other (income) expense, net combined with the impact of changes in foreign currency exchange rates on the translation of foreign currency-denominated profits did not have a significant impact on Income before income taxes.
• The Effective tax rate was 27.3 percent compared to 26.0 percent for the same period last year. The increase was due to the adjustment of a deferred tax asset related to foreign operations and changes in reserves this year, as well as comparisons to the prior year quarter which benefitted from the retroactive reinstatement of the U.S. R&D tax credit.
• Net income increased 7 percent to $560 million andDiluted earnings per share increased 11 percent to $1.20, reflecting a 4 percent decline in the weighted average diluted common shares outstanding.