Nike, Inc. Reports Third Quarter Earnings Per Share Up 36 Percent; Worldwide Futures Orders Increase 9.6 Percent
"Today's results mark another terrific quarter for Nike, Inc.," said William D. Perez, Nike, Inc. President and Chief Executive Officer. "This was our sixth consecutive quarter of double-digit revenue and earnings per share growth. These consistently strong results were driven by excellent performance across geographies and brands, coupled with favorable trends in foreign exchange rates. In addition to another strong quarter for our U.S. business, emerging international markets such as China, Russia and Brazil produced significant growth. While the core Nike Brand fueled the majority of our growth, Nike Golf, Converse and Cole Haan were also major contributors to our positive results."*
The Company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from March 2005 through July 2005, totaling $5.2 billion, 9.6 percent higher than such orders reported for the same period last year. Approximately one point of this growth was due to changes in currency exchange rates.*
By region, futures orders for the U.S. were up nine percent; Europe increased seven percent; Asia Pacific grew 14 percent; and the Americas increased 22 percent. In Europe, two points of the increase were due to currency exchange rates. Currency exchange rates contributed to the growth in Asia Pacific and the Americas by approximately two points and one point, respectively.*
Perez continued, "Global consumer demand for Nike brand footwear and apparel continues to be strong, as evidenced by the growth in futures orders. Demand in the U.S. market remains particularly robust, as Nike product innovation continues to drive the trend toward performance footwear and apparel in this market."*
During the third quarter, U.S. revenues increased nine percent to $1.3 billion versus $1.2 billion for the third quarter of fiscal 2004. U.S. athletic footwear revenues increased 10 percent to $849.6 million. Apparel revenues increased five percent to $345.8 million. Equipment revenues increased 12 percent to $72.8 million. U.S. pre-tax income increased 10 percent to $259.5 million.
Revenues for the Europe, Middle East and Africa region grew 18 percent to $1.0 billion, up from $878.6 million for the same period last year. Nine points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 14 percent to $615.3 million, apparel revenues increased 24 percent to $351.3 million and equipment revenues increased 18 percent to $67.3 million. Pre-tax income rose 28 percent to $219.3 million.
Revenues in the Asia Pacific region grew 18 percent to $472.8 million compared to $402.2 million a year ago. Five points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 11 percent to $237.9 m illion, apparel revenues increased 25 percent to $188.3 million and equipment grew 23 percent to $46.6 million. Pre-tax income was up 16 percent to $100.4 million.
Revenues in the Americas region increased 10 percent to $143.7 million, an improvement from $131.1 million in the third quarter of fiscal 2004. Currency exchange rates resulted in a three-percentage point increase in this growth rate. Footwear revenues were up 13 percent to $99.6 million, apparel revenues decreased five percent to $33.5 million and equipment improved 34 percent to $10.6 million. Pre-tax income grew 49 percent to $23.2 million.
Other revenues, which include Converse Inc., NIKE Golf, Bauer NIKE Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 20 percent to $389.6 million from $325.1 million last year. Pre-tax income increased 724 percent to $23.9 million.
Income Statement Review
Gross margins were 44.1 percent compared to 42.1 percent last year. Selling and administrative expenses were 31.3 percent of third quarter revenues, compared to 30.7 percent last year. The effective tax rate for the third quarter was 33.9 percent.
Balance Sheet Review
At quarter end, global inventories stood at $1.7 billion, an increase of four percent from February 29, 2004. Cash and short-term investments were $1.6 billion at the end of the quarter, compared to $914.7 million last year.
During the quarter, the Company purchased a total of 2,302,000 shares for approximately $199.8 million in conjunction with the Company's four-year, $1.5 billion share repurchase program that was approved by the Board of Directors in June 2004. To date, the Company has repurchased a total of 5,070,900 shares under this program.
NIKE, Inc. based in 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. Wholly owned Nike subsidiaries include Converse Inc., which designs, markets and distributes athletic footwear, apparel and accessories; Bauer NIKE Hockey Inc., a leading designer and distributor of hockey equipment; Cole Haan, a leading designer and marketer of luxury shoes, handbags, accessories and coats; Hurley International LLC, which designs, markets and distributes action sports and youth lifestyle footwear, apparel and accessories and Exeter Brands Group LLC, which designs and markets athletic footwear and apparel for the value retail channel.