Apparel retailer Nike Q4'FY14 diluted EPS lifts 3%

27 Jun '14

3 min read

NIKE, Inc. reported fiscal 2014 financial results for its fourth quarter and full year ended May 31, 2014. Despite the negative impact of changes in foreign exchange rates, diluted earnings per share for the quarter increased 3 percent as revenue growth, gross margin expansion and a lower average share count more than offset increased SG&A investments and a higher tax rate.

Highlights:

-Fourth quarter revenues from continuing operations up 11 percent to $7.4 billion

-Fourth quarter diluted earnings per share from continuing operations up 3 percent to $0.78

-Fiscal 2014 revenues from continuing operations up 10 percent to $27.8 billion

-Fiscal 2014 diluted earnings per share from continuing operations up 11 percent to $2.97

-Worldwide futures orders up 11 percent; 12 percent growth excluding currency changes

Inventories as of May 31, 2014 up 13 percent

-Fiscal 2014 diluted earnings per share rose 11 percent to $2.97, reflecting 10 percent revenue growth, gross margin expansion, a lower tax rate and a lower average share count, which more than offset the impacts of higher SG&A investments and foreign exchange headwinds.

Fourth Quarter Continuing Operations Income Statement Review

Revenues for NIKE, Inc. rose 11 percent to $7.4 billion, up 13 percent on a currency neutral basis.

Revenues for the Nike Brand were $7.0 billion, up 13 percent on a currency neutral basis powered by growth in every key category and geography except Japan, where revenues were in line with the fourth quarter last year.

Revenues for Converse were $410 million, up 15 percent on a currency neutral basis, mainly driven by strong performance in our largest direct distribution markets: the United States, China and the United Kingdom.

Gross margin expanded 170 basis points to 45.6 percent. The increase was primarily attributable to higher average selling prices and continued growth in the higher margin Direct to Consumer (DTC) business, partially offset by higher product input costs and unfavorable foreign exchange rates.

Selling and administrative expense increased 21 percent to $2.4 billion. Demand creation expense was $876 million, up 36 percent, driven by marketing support for the World Cup and key product initiatives. Operating overhead expense increased 13 percent to $1.6 billion due to higher costs for the expanding DTC business, as well as investments in infrastructure and digital innovation.

Other expense, net was $17 million, comprised primarily of foreign exchange losses. For the quarter, the Company estimates the year-over-year change in foreign currency related gains and losses included in other expense (income), net, combined with the impact of changes in currency exchange rates on the translation of foreign currency-denominated profits, decreased pretax income by approximately $30 million.

The effective tax rate was 23.5 percent, compared to 22.9 percent for the fourth quarter last year. The effective tax rate for the prior period was lower due to a reduction in tax reserves related to foreign operations.

Net income increased 1 percent to $698 million while diluted earnings per share increased 3 percent to $0.78, reflecting a decrease in the weighted average diluted common shares outstanding.

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Nike

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