Nike Q4 revenues rise 6 percent but earnings disappoint

Nike has said that while strong global demand fuelled revenue increases across all geographies in fiscal 2016, and positive rise in international revenue drove growth in the fourth quarter, diluted earnings per share for the quarter were flat at 0.49 dollar. Fiscal 2016 diluted earnings rose 17 percent to 2.16 dollars.

“Our consistent growth is fuelled by innovation, which is why fiscal 2016 was such a breakthrough year for Nike in everything we do,” said Mark Parker, President and CEO of the company, adding, “From product to manufacturing to how we serve our consumers – more personally and at scale – we’ve raised the bar of what’s possible. It’s a great time to be in sports, and the Nike Brand has never been stronger.

Review of the fourth quarter and full year

Revenues for Nike rose 6 percent to 8.2 billion dollars up 9 percent on a currency-neutral basis. Revenues for the Nike Brand were 7.7 billion dollars, up 8 percent on a currency-neutral basis, which Nike said were driven by double-digit growth in Western Europe, Greater China, Emerging Markets and Japan, including strong growth in Sportswear, Global Football and the Jordan Brand. Revenues for Converse were 513 million dollars, up 18 percent on a currency-neutral basis.

Gross margin declined 30 basis points to 45.9 percent as higher average selling prices were more than offset by higher product costs, the negative impact of clearing excess inventory in North America and unfavourable changes in foreign currency exchange rates.

Net income decreased 2 percent to 846 million dollars, while diluted earnings per share remained unchanged from the prior year at 0.49 dollar reflecting a 2 percent decline in the weighted average diluted common shares outstanding.

Financial highlights of the fiscal 2016

Revenues for Nike rose 6 percent to 32.4 billion dollars, up 12 percent on a currency-neutral basis. Revenues for the Nike Brand were 30.5 billion dollars, up 13 percent excluding the impact of changes in foreign currency.

Nike Brand sales to wholesale customers increased 9 percent on a currency-neutral basis while DTC revenues grew to 7.9 billion dollars, up 25 percent excluding the impact of changes in foreign currency, driven by a 51 percent increase in online sales, the addition of new stores and 10 percent growth in comparable store sales. As of May 31, 2016, the Nike brand had 919 DTC stores in operation as compared to 832 a year ago.

On a currency neutral basis, the company said, Nike brand revenue growth was driven by robust growth in every geography as well as most key categories including sportswear, running and the Jordan brand. Men’s, women’s and young athletes’ businesses all grew double-digits. Revenues for Converse were 2 billion dollars, up 2 percent on a currency neutral basis, driven by strong growth in the United States and Asia Pacific, slightly offset by lower sales in Europe.

Gross margin expanded 20 basis points to 46.2 percent primarily driven by higher average selling prices and growth in the higher margin DTC business which were partially offset by higher product costs, the negative impact of foreign currency exchange rates, and the impact from clearing excess inventory in North America.

Net income increased 15 percent to 3.8 billion dollars reflecting global revenue growth, gross margin expansion and a lower tax rate. Diluted earnings per share increased 17 percent to 2.16 dollars.

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