Q3FY16 net soars 20% at Nike

25 Mar '16

3 min read

For its fiscal 2016 third quarter ended February 29, 2016, net income at sports goods and sportswear retailer Nike, soared 20 per cent year over year.

In a press release, Nike said its net income for the third quarter of fiscal 2016 surged 20 per cent to $950 million, driven by strong revenue growth and a lower effective tax rate.

While, diluted earnings per share drove up 22 per cent to $0.55, reflecting a 2 percent decline in the weighted average diluted common shares outstanding.

In the reporting quarter, revenues rose 8 per cent year on year to $8 billion and 14 per cent on a currency neutral basis.

Revenues for the Nike brand were $7.6 billion, up 15 per cent on a currency neutral basis driven by growth in all geographies and nearly all key categories.

Revenues for Converse were $489 million, down 5 per cent on a currency neutral basis, mainly driven by a major system go-live that accelerated orders from the fourth quarter to the third quarter in the prior fiscal.

In the quarter under review, gross margin was 45.9 percent, flat compared to the prior fiscal's fourth quarter, benefitting from higher average selling prices and continued growth in the higher margin DTC business.

“These were offset by unfavourable changes in foreign currency exchange rates, higher warehousing costs, and the impact of clearing excess inventory in North America,” the company explained.

SG&A expense increased 8 per cent from a fiscal ago period to $2.6 billion, while demand creation expense was $804 million, up 10 per cent, due to increased investments in advertising and brand events.

In the reporting period, operating overhead expense grew 7 percent to $1.8 billion, reflecting growth in the DTC business and targeted investments in operational infrastructure and consumer-focused digital capabilities.

The effective tax rate for the third quarter of fiscal 2016 was lower at 16.3 per cent, compared to 24.4 per cent for the same period last fiscal.

This was primarily due to an increase in the proportion of earnings from operations outside of the US, which are generally subject to a lower tax rate and increased recognition of foreign tax credits.

The reasons also included adjustments in the prior fiscal to tax expense on intercompany transactions, and the retroactive and permanent reinstatement of the US research and development tax credit.

Inventories drove up 8 per cent to $4.6 billion, up 8 per cent from February 28, 2015 driven by a 4 per cent increase in Nike brand wholesale unit inventories and growth in DTC business.

Cash and short-term investments at the end of the third quarter were $5.1 billion; $255 million lower than at the end of the previous fiscal's third quarter.

During the third quarter, Nike repurchased a total of 24.3 million shares for approximately $1.5 billion and concluded its previous four-year, $8 billion share repurchase program approved in September 2012.

Under this program, the company purchased a total of 197.1 million shares at an average price of approximately $40.58. (AR)

Fibre2Fashion News Desk – India

More Nike News... More Apparel/Garments News - United States Of America...