Nike fourth quarter results beat expectations

Nike fourth quarter results beat expectations thanks to impressive sales in Western Europe and North America. In after-hours trading, shares in the Oregon-based footwear and apparel company rose.

Between March and May 2014, Nike launched several news shoes, including Portugal’s soccer star Cristiano Ronaldo’s Mercurial Superfly.

Nike, classed as a “blue chip” company, is now sponsoring more national soccer teams (10) in the FIFA World Cup than its arch-rival Adidas (9), for the first time ever. Among the top teams, Nike sponsors Brazil and Portugal, while Adidas has Germany and Spain.

Nike reported:

  • Q4 net income of $698 million, just a 1% increase. This was due to its large increase in marketing spending during the quarter,
  • a 36% increase in marketing spending to $876 million, as the company boosted promotion leading up to the 2014 FIFA World Cup,
  • Q4 revenues from continuing operations at $7.4 billion, an 11% increase,
  • Q4 diluted earnings per share from continuing operations at $0.78, a 3% rise,
  • whole year fiscal 2014 revenues from continuing operations at $27.8 billion, a 10% rise,
  • whole year fiscal 2014 diluted earnings per share from continuing operations at $2.97, 11% up,
  • an increase in worldwide futures orders of 11%,

Nike President and CEO Mark Parker, said:

“These results demonstrate the energy and excitement Nike brings to the market. Our ability to relentlessly innovate for consumers drove our growth in FY14, and will continue to fuel it for years to come. And as we grow, we remain focused on managing all areas of our business to drive sustainable, profitable growth for our shareholders.”

Q4 Continuing Operations Income Statement Review

Revenues: for Nike Inc. increased 11% to $7.4 billion, or 13% up on a currency neutral basis.

For the Nike Brand revenues increased by 13% to $7 billion on a currency neutral basis. There was growth in all parts of the world except Japan and in every key category. In Japan, revenue was the same as in Q4 a year earlier.

Revenues for Converse, a Nike subsidiary, rose by 15% on a currency neutral basis to $410 million, driven mainly by strong sales in its largest direct distribution markets: the US, UK and China.

Gross Margin: rose to 45.6 or 170 basis points. This was mainly due to higher average selling prices and sales growth in higher margin DTC (direct-to-consumer) business. Margins were slightly offset by unfavorable exchange rates and higher input costs.

Selling and administrative expenses: rose by 21% to $2.4 billion. Marketing expenses were up 36% ($876 million), driven by FIFA World Cup spending plus key product initiatives.

Operating overhead expense, at $1.6 billion, rose 13% due to the expansion of the DTC business, as well as investments in digital innovation and infrastructure.

Other Expenses: totaled $17 million, and consisted mainly of losses in foreign exchange, which the company estimates ended up costing about $30 million.

Nike fourth quarter results

(Source: NIKE)

Share repurchases

In Q4, Nike Inc. repurchased 12.3 million shares for about $912 million as part of its $8 billion, 4-year program which was approved by the Board in September 2012.

By the end of fiscal 2014, $3.4 billions’ worth of shares (51.9 million) had been repurchased at an average cost of $65.83 each share.