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Nike reported stronger earnings than expected  for the fiscal second quarter of 2020 after the close Thursday. $NKE saw strong revenue growth, gross margin expansion, selling and administrative expense leverage,  lower tax rate and lower average share count.

Nike Women Athlete

Nike Inc NYSE: NKE Reported Earnings After Close Thursday

 $0.70 Beat $0.58 EPS AND $10.33 Billion Beat $10.10 Billion forecast in revenue. 

Earnings 

Nike reported an EPS of 70 cents on revenue of $10.33 billion. Wall Street expected Nike earnings per share to climb 12% to 58 cents, according to Zacks Investment Research on Revenue seen rising 8% to $10.1 billion as Nike brand revenue grew 12% to $9.8 billion. Gross margin increased 20 basis points to 44%, primarily due to higher average selling prices and margin expansion in Nike Direct and Converse,

Nike Inc NYSE: NKE

Market Reaction - After Close $100.80 −0.35 (-0.35%)

“NIKE delivered another strong quarter of accelerating, high-quality growth, driven by strategic and targeted investment in our digital transformation. As we deliver a relentless flow of innovation and scale NIKE’s digital advantage, we are positioned for even greater competitive separation and long-term shareholder value creation, “said CFO Andy Campion.

Highlights

  • Revenues for the NIKE Brand were $9.8 billion, up 12 percent on a currency-neutral basis driven by growth across wholesale and NIKE Direct; key categories including Sportswear, the Jordan Brand and Running, and continued growth across footwear and apparel.
  • Revenues for Converse were $480 million, up 15 percent on a currency-neutral basis, mainly driven by double-digit growth in Asia and Europe, as well as through digital globally.
  • Gross marginincreased 20 basis points to 44.0 percent primarily due to higher average selling prices and margin expansion in NIKE Direct and Converse, partially offset by impacts from higher product costs, primarily due to incremental tariffs in North America.
  • Selling and administrative expense increased 6 percent to $3.3 billion. Demand creation expense was $881 million, down 3 percent due primarily to a timing shift of investment in certain brand campaigns.
  • Operating overhead expense increased 9 percent to $2.4 billion driven by continued investments in transformational capabilities, particularly in NIKE Direct and global operations. 
  • Theeffective tax ratewas 10.7 percent, compared to 15 percent for the same period last year, primarily due to a more favorable impact from stock-based compensation.
  • et income increased 32 percent to $1.1 billion driven primarily by strong revenue growth,gross margin expansion, selling and administrative expense leverage and a lower tax rate, while diluted earnings per share increased 35 percent to $0.70 reflecting a nearly 2 percent decline in the weighted average diluted common shares outstanding. November 30, 2019

Balance Sheet Review

Inventories for NIKE, Inc. were $6.2 billion, up 15 percent compared to the prior year period, reflecting strong consumer demand globally as well as a higher rate of on-time factory deliveries, and to a lesser extent, the impact from changes in foreign currency exchange rates.

Cash and equivalents and short-term investmentswere $3.5 billion, $539 million lower than last year as share repurchases, dividends, and investments in infrastructure more than offset proceeds from net income.

Share Repurchases

During the second quarter, NIKE, Inc. repurchased 10.1 million shares for approximately $922 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018.

As of November 30, 2019, a total of 33.6 million shares had been repurchased under this program for approximately $2.9 billion.

Conference Call NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on December 19, 2019, to review fiscal second quarter results. The conference call will be broadcast live via the Internet and can be accessed at http://investors.nike.com.

Outlook

 

Source: Nike, AlphaStreet

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