MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
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Editor's note: Q4 Hurley, Converse revenues rise double digits;
Fourth quarter revenues up 14 percent to $5.8 billion; up 11 percent excluding currency changes
Fourth quarter diluted earnings per share up 17 percent to $1.24
Fiscal 2011 revenues of $20.9 billion, up 10 percent on both reported and currency neutral basis
Fiscal year diluted earnings per share up 14 percent to $4.39
NIKE Brand futures orders up 15 percent; up 12 percent excluding currency changes
Inventories as of May 31, 2011 were up 33 percent versus the prior year
BEAVERTON, Ore., Jun 27, 2011 (BUSINESS WIRE) -- NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2011 fourth quarter and full year ended May 31, 2011. Diluted earnings per share for both the quarter and full year hit record highs, as higher revenues and SG&A expense leverage more than offset a lower gross margin rate.
"In fiscal year 2011, we delivered exceptional results in extraordinary times," said Mark Parker, NIKE, Inc. President and CEO. "Our business is organized to drive growth across multiple brands, geographies and categories, as we manage through the ever-changing macroeconomic landscape." Parker added, "We continue to deliver compelling innovation to athletes and consumers, and strong returns for our shareholders. The global appetite for sports has never been stronger."*
As of the end of the quarter, futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from June through November 2011, totaled $10.3 billion, 15 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 12 percent.*
By geography, futures orders were as follows:
Geography Reported Futures Orders Excluding Currency Changes
North America +14% +14%
Western Europe +11% +1%
Central and Eastern Europe +13% +10%
Greater China +24% +17%
Japan -13% -6%
Emerging Markets +25% +23%
Total NIKE Brand Futures Orders +15% +12%
Fourth Quarter Income Statement Review
Revenues for NIKE, Inc. increased 14 percent to $5.8 billion, up 11 percent on a currency neutral basis. Excluding the impact of changes in foreign currency, NIKE Brand revenues rose 12 percent, driven by growth in all geographies except Japan and Central and Eastern Europe. By category, revenues were up on a currency neutra l basis in all key categories except Football (Soccer), which faced tough comparisons to last year's World Cup.
Revenues for Other Businesses increased 6 percent with a 1 percentage point benefit from changes in currency exchange rates. For the quarter, growth in Converse, Cole Haan and Hurley more than offset lower revenues at Umbro and NIKE Golf.
Gross margin declined 310 basis points to 44.3 percent, primarily driven by higher product costs. Other factors contributing to this decline include elevated freight costs (including airfreight to meet strong demand for select NIKE Brand products), higher inventory obsolescence reserves and higher royalty expenses related to sales of endorsed team products. These factors more than offset the positive impact of growing sales in our Direct to Consumer operations and ongoing product cost reduction initiatives.
Selling and administrative expenses grew at a slower rate than revenue, up 2 percent to $1.8 billion. Demand creation expenses were $617 million, down 7 percent from higher prior year spending in support of the World Cup. Operating overhead expenses increased 8 percent to $1.2 billion due to additional investments in our Direct to Consumer business and low single digit growth in our core operating overhead.
Net income increased 14 percent to $594 million and diluted earnings per share increased 17 percent to $1.24, reflecting higher net income and a 3 percent decline in the number of weighted average diluted common shares outstanding.
Fourth Quarter Operating Segment Review
NIKE Brand revenues in North America increased 22 percent to $2.1 billion with a 1 percentage point benefit from changes in currency exchange rates. Revenues were higher on a currency neutral basis in all key categories except Football (Soccer); the strongest growth came from Running, Men's Training, Sportswear, Basketball and Women's Training, which were all up at a double-digit rate for the quarter. Footwear and Apparel revenues, up 20 and 28 percent, respectively, were driven by strong category presentations, improved product lines and earlier shipments of summer season product.
We continue to see momentum in our Direct to Consumer business with sales up 23 percent. This increase was driven by an 18 percent improvement in same store sales and 31 percent growth in online sales.
Earnings before interest and taxes (EBIT) grew 20 percent to $522 million as revenue growth and leverage of selling and administrative expenses more than offset a lower gross margin rate for the quarter.
See page 2 for fourth quarter earnings in Europe and other international markets