NIKE, Inc. Reports Fiscal 2025 First Quarter Results

Rhea-AI Summary

NIKE, Inc. (NYSE:NKE) reported fiscal 2025 Q1 results with revenues of $11.6 billion, down 10% on a reported basis and 9% currency-neutral. NIKE Direct revenues were $4.7 billion, down 13% reported and 12% currency-neutral. Wholesale revenues were $6.4 billion, down 8% reported and 7% currency-neutral. Gross margin increased 120 basis points to 45.4%. Diluted earnings per share was $0.70, down 26%.

The company announced Elliott Hill as the new President and CEO, effective October 14, 2024. NIKE's previously announced Investor Day is postponed. The company returned approximately $1.8 billion to shareholders, including $558 million in dividends and $1.2 billion in share repurchases.

Positive

• Gross margin increased 120 basis points to 45.4%
• Cash and equivalents increased by $1.5 billion compared to last year
• Returned $1.8 billion to shareholders through dividends and share repurchases
• Inventories decreased by 5% compared to the prior year

Negative

• Total revenues decreased by 10% to $11.6 billion
• NIKE Direct revenues declined by 13% to $4.7 billion
• Wholesale revenues fell by 8% to $6.4 billion
• Diluted earnings per share decreased by 26% to $0.70
• NIKE Brand Digital sales decreased by 20%
• Converse revenues declined by 15% to $501 million

Insights

Financial Analyst

NIKE's Q1 FY2025 results paint a challenging picture. Revenue declined 10% to $11.6 billion, with NIKE Direct down 13% and wholesale down 8%. The 20% decrease in NIKE Brand Digital is particularly concerning, given the industry's shift towards e-commerce. However, there are some positive signs:

1. Gross margin improved by 120 basis points to 45.4%, driven by lower costs and strategic pricing.
2. Inventory levels decreased by 5%, indicating better supply chain management.
3. Cash position strengthened, up $1.5 billion from last year.

The 26% drop in EPS to $0.70 is significant and reflects the overall revenue decline. The postponement of the Investor Day and lack of guidance due to the CEO transition adds uncertainty. While NIKE sees "early wins," the recovery appears to be slow and investors should closely monitor future quarters for signs of sustainable improvement.

Market Research Analyst

NIKE's Q1 results reveal significant challenges in the current market landscape:

• The 9% currency-neutral revenue decline across all geographies indicates widespread market softness.
• NIKE Direct's 12% currency-neutral drop, especially the 20% decrease in Digital, suggests changing consumer behaviors post-pandemic.
• Converse's 14% currency-neutral decline points to broader issues beyond the core NIKE brand.

However, the 1% increase in NIKE-owned stores is a bright spot, showing some resilience in physical retail. The company's focus on "accelerating pace of newness and innovation" and "momentum in key sports" suggests a strategic shift to reignite growth. The incoming CEO, Elliott Hill, brings insider knowledge that could be important for navigating these challenges. Investors should watch for new strategies and product launches in the coming quarters to gauge NIKE's ability to regain market share and adapt to evolving consumer preferences.

BEAVERTON, Ore.--(BUSINESS WIRE)-- NIKE, Inc. (NYSE:NKE) today reported fiscal 2025 financial results for its first quarter ended August 31, 2024.

• First quarter revenues were $11.6 billion, down 10 percent on a reported basis compared to the prior year and down 9 percent on a currency-neutral basis*
• NIKE Direct revenues were $4.7 billion, down 13 percent on a reported basis and down 12 percent on a currency-neutral basis
• Wholesale revenues were $6.4 billion, down 8 percent on a reported basis and down 7 percent on a currency-neutral basis
• Gross margin increased 120 basis points to 45.4 percent
• Diluted earnings per share was $0.70 for the first quarter, down 26 percent

On September 19, 2024, NIKE, Inc. announced that the Board of Directors of the Company appointed Elliott Hill as President and CEO of the Company, effective as of October 14, 2024. Given the Company is reporting Q1 results in the midst of a CEO transition, it will address its approach to guidance on the conference call. In addition, the Company's previously announced Investor Day is being postponed.

"NIKE's first quarter results largely met our expectations. A comeback at this scale takes time, but we see early wins — from momentum in key sports to accelerating our pace of newness and innovation," said Matthew Friend, Executive Vice President and Chief Financial Officer, NIKE, Inc. "Our teams are energized as Elliott Hill returns to lead NIKE's next stage of growth."

First Quarter Income Statement Review

• Revenues for NIKE, Inc. were $11.6 billion, down 10 percent on a reported basis compared to the prior year and down 9 percent on a currency-neutral basis.
  • NIKE Brand Revenues were $11.1 billion, down 10 percent on a reported basis and down 9 percent on a currency-neutral basis, due to declines across all geographies.
  • NIKE Direct revenues were $4.7 billion, down 13 percent on a reported basis and down 12 percent on a currency-neutral basis, primarily due to a 20 percent decrease in NIKE Brand Digital, partially offset by a 1 percent increase in NIKE-owned stores.
  • Wholesale revenues were $6.4 billion, down 8 percent on a reported basis and down 7 percent on a currency-neutral basis.
  • Revenues for Converse were $501 million, down 15 percent on a reported basis and down 14 percent on a currency-neutral basis, due to declines across all territories.
• Gross margin increased 120 basis points to 45.4 percent, primarily due to lower NIKE Brand product costs, lower warehousing and logistics costs, and benefits from strategic pricing actions from the prior year.
• Selling and administrative expense decreased 2 percent to $4.0 billion.
  • Demand creation expense was $1.2 billion, up 15 percent, primarily due to an increase in brand marketing expense, reflecting investment in key sports events.
  • Operating overhead expense decreased 7 percent to $2.8 billion, primarily due to lower wage-related expenses.
• The effective tax rate was 19.6 percent compared to 12.0 percent for the same period last year, primarily due to a one-time item benefit in the first quarter of the prior year provided by the delay of the effective date of U.S. foreign tax credit regulations.
• Net income was $1.1 billion, down 28 percent, and Diluted earnings per share was $0.70, a decrease of 26 percent.

August 31, 2024 Balance Sheet Review

• Inventories for NIKE, Inc. were $8.3 billion, down 5 percent compared to the prior year, reflecting product mix shifts and lower product input costs.
• Cash and equivalents and short-term investments were $10.3 billion, up approximately $1.5 billion from last year, as cash generated by operations was partially offset by share repurchases, cash dividends and capital expenditures.

Shareholder Returns

NIKE continues to have a strong track record of consistently increasing returns to shareholders, including 22 consecutive years of increasing dividend payouts.

In the first quarter, the Company returned approximately $1.8 billion to shareholders, including:

• Dividends of $558 million, up 6 percent from the prior year.
• Share repurchases of $1.2 billion, reflecting 14.8 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 August 31, 2024, a total of 99.7 million shares have been repurchased under the program for a total of approximately $10.2 billion.

Conference Call

NIKE, Inc. management will host a conference call beginning at approximately 2:00 p.m. PT on October 1, 2024, to review fiscal first 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, October 22, 2024.

About NIKE, Inc.

NIKE, Inc., based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.nike.com. Individuals can also visit http://news.nike.com and follow @NIKE.

Forward-Looking Statements

This press release contains forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed from time to time in reports filed by NIKE with the U.S. Securities and Exchange Commission (SEC), including Forms 8-K, 10-Q and 10-K.

*

Non-GAAP financial measure. See additional information in the accompanying Divisional Revenues.

NIKE, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
	THREE MONTHS ENDED						%
(In millions, except per share data)	8/31/2024			8/31/2023			Change
Revenues	$	11,589		$	12,939		-10	%
Cost of sales		6,332			7,219		-12	%
Gross profit		5,257			5,720		-8	%
Gross margin		45.4	%		44.2	%
Demand creation expense		1,226			1,069		15	%
Operating overhead expense		2,822			3,047		-7	%
Total selling and administrative expense		4,048			4,116		-2	%
% of revenues		34.9	%		31.8	%
Interest expense (income), net		(43	)		(34	)	—
Other (income) expense, net		(55	)		(10	)	—
Income before income taxes		1,307			1,648		-21	%
Income tax expense		256			198		29	%
Effective tax rate		19.6	%		12.0	%
NET INCOME	$	1,051		$	1,450		-28	%
Earnings per common share:
Basic	$	0.70		$	0.95		-26	%
Diluted	$	0.70		$	0.94		-26	%
Weighted average common shares outstanding:
Basic		1,497.7			1,528.4
Diluted		1,502.0			1,543.3
Dividends declared per common share	$	0.370		$	0.340

NIKE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	August 31,		August 31,		% Change
(Dollars in millions)	2024		2023
ASSETS
Current assets:
Cash and equivalents	$	8,485	$	6,178	37	%
Short-term investments		1,809		2,612	-31	%
Accounts receivable, net		4,764		4,749	0	%
Inventories		8,253		8,698	-5	%
Prepaid expenses and other current assets		1,729		2,013	-14	%
Total current assets		25,040		24,250	3	%
Property, plant and equipment, net		4,948		5,109	-3	%
Operating lease right-of-use assets, net		2,792		2,939	-5	%
Identifiable intangible assets, net		259		272	-5	%
Goodwill		240		281	-15	%
Deferred income taxes and other assets		4,588		3,935	17	%
TOTAL ASSETS	$	37,867	$	36,786	3	%
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	1,000	$	—	100	%
Notes payable		12		6	100	%
Accounts payable		3,357		2,738	23	%
Current portion of operating lease liabilities		491		435	13	%
Accrued liabilities		5,075		4,987	2	%
Income taxes payable		693		295	135	%
Total current liabilities		10,628		8,461	26	%
Long-term debt		7,998		8,929	-10	%
Operating lease liabilities		2,625		2,807	-6	%
Deferred income taxes and other liabilities		2,672		2,618	2	%
Redeemable preferred stock		—		—	—
Shareholders’ equity		13,944		13,971	0	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	37,867	$	36,786	3	%

NIKE, Inc.
DIVISIONAL REVENUES
(Unaudited)
									% Change Excluding Currency Changes1
	THREE MONTHS ENDED						%
(Dollars in millions)	8/31/2024			8/31/2023			Change
North America
Footwear	$	3,212		$	3,733		-14	%	-14	%
Apparel		1,331			1,479		-10	%	-10	%
Equipment		283			211		34	%	34	%
Total		4,826			5,423		-11	%	-11	%
Europe, Middle East & Africa
Footwear		1,952			2,260		-14	%	-12	%
Apparel		993			1,137		-13	%	-11	%
Equipment		198			213		-7	%	-6	%
Total		3,143			3,610		-13	%	-12	%
Greater China
Footwear		1,246			1,287		-3	%	-2	%
Apparel		360			401		-10	%	-9	%
Equipment		60			47		28	%	29	%
Total		1,666			1,735		-4	%	-3	%
Asia Pacific & Latin America
Footwear		1,052			1,141		-8	%	-3	%
Apparel		348			371		-6	%	-2	%
Equipment		62			60		3	%	9	%
Total		1,462			1,572		-7	%	-2	%
Global Brand Divisions2		14			13		8	%	20	%
TOTAL NIKE BRAND		11,111			12,353		-10	%	-9	%
Converse		501			588		-15	%	-14	%
Corporate3		(23	)		(2	)	—		—
TOTAL NIKE, INC. REVENUES	$	11,589		$	12,939		-10	%	-9	%
TOTAL NIKE BRAND
Footwear	$	7,462		$	8,421		-11	%	-10	%
Apparel		3,032			3,388		-11	%	-9	%
Equipment		603			531		14	%	15	%
Global Brand Divisions2		14			13		8	%	20	%
TOTAL NIKE BRAND REVENUES	$	11,111		$	12,353		-10	%	-9	%
1The percent change has been calculated using actual exchange rates in use during the comparative prior year period and is provided to enhance the visibility of the underlying business trends by excluding the impact of translation arising from foreign currency exchange rate fluctuations, which is considered a non-GAAP financial measure. Management uses this non-GAAP financial measure when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes this non-GAAP financial measure provides investors with additional financial information that should be considered when assessing the Company's underlying business performance and trends. References to this measure should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.
2 Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.
3 Corporate revenues primarily consist of foreign currency hedge gains and losses related to revenues generated by entities within the NIKE Brand geographic operating segments and Converse, but managed through the Company's central foreign exchange risk management program.

NIKE, Inc.
EARNINGS BEFORE INTEREST AND TAXES1
(Unaudited)
	THREE MONTHS ENDED						%
(Dollars in millions)	8/31/2024			8/31/2023			Change
North America	$	1,216		$	1,434		-15	%
Europe, Middle East & Africa		792			930		-15	%
Greater China		502			525		-4	%
Asia Pacific & Latin America		402			414		-3	%
Global Brand Divisions2		(1,227	)		(1,205	)	-2	%
TOTAL NIKE BRAND1		1,685			2,098		-20	%
Converse		121			167		-28	%
Corporate3		(542	)		(651	)	17	%
TOTAL NIKE, INC. EARNINGS BEFORE INTEREST AND TAXES1		1,264			1,614		-22	%
EBIT margin1		10.9	%		12.5	%
Interest expense (income), net		(43	)		(34	)	—
TOTAL NIKE, INC. INCOME BEFORE INCOME TAXES	$	1,307		$	1,648		-21	%
1 The Company evaluates the performance of individual operating segments based on earnings before interest and taxes (commonly referred to as "EBIT"), which represents Net income before Interest expense (income), net and Income tax expense. Total NIKE Brand EBIT, Total NIKE, Inc. EBIT and EBIT margin are considered non-GAAP financial measures. Management uses these non-GAAP financial measures when evaluating the Company's performance, including when making financial and operating decisions. Additionally, management believes these non-GAAP financial measures provide investors with additional financial information that should be considered when assessing the Company’s underlying business performance and trends. EBIT margin is calculated as total NIKE, Inc. EBIT divided by total NIKE, Inc. Revenues. References to EBIT and EBIT margin should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with U.S. GAAP and may not be comparable to similarly titled non-GAAP measures used by other companies.
2 Global Brand Divisions primarily represent demand creation and operating overhead expense, including product creation and design expenses that are centrally managed for the NIKE Brand, as well as costs associated with NIKE Direct global digital operations and enterprise technology. Global Brand Divisions revenues include NIKE Brand licensing and other miscellaneous revenues that are not part of a geographic operating segment.
3 Corporate consists primarily of unallocated general and administrative expenses, including expenses associated with centrally managed departments; depreciation and amortization related to the Company’s corporate headquarters; unallocated insurance, benefit and compensation programs, including stock-based compensation; and certain foreign currency gains and losses, including certain hedge gains and losses.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241001791667/en/

Investor Contact:

Paul Trussell

investor.relations@nike.com

Media Contact:

Virginia Rustique-Petteni

media.relations@nike.com

Source: NIKE, Inc.

FAQ

What were NIKE's (NKE) Q1 fiscal 2025 revenue results?

NIKE's Q1 fiscal 2025 revenues were $11.6 billion, down 10% on a reported basis and 9% on a currency-neutral basis compared to the prior year.

How did NIKE's (NKE) earnings per share change in Q1 fiscal 2025?

NIKE's diluted earnings per share for Q1 fiscal 2025 was $0.70, down 26% compared to the same period last year.

Who was appointed as the new President and CEO of NIKE (NKE)?

Elliott Hill was appointed as the new President and CEO of NIKE, effective October 14, 2024.

How much did NIKE (NKE) return to shareholders in Q1 fiscal 2025?

NIKE returned approximately $1.8 billion to shareholders in Q1 fiscal 2025, including $558 million in dividends and $1.2 billion in share repurchases.

What happened to NIKE's (NKE) gross margin in Q1 fiscal 2025?

NIKE's gross margin increased by 120 basis points to 45.4% in Q1 fiscal 2025.