Nike Q4 net income rises 14%

Western Europe

Fourth quarter revenues for Western Europe grew 5 percent with 4 percentage points of benefit from changes in currency exchange rates. On a constant currency basis, revenues grew in every territory except France and Northern Europe. By category, currency neutral revenue growth in Running, Basketball, Men's Training and Women's Training was mostly offset by lower revenues in Sportswear and Action Sports. Football (Soccer) revenues were flat for the quarter.

Fourth quarter EBIT for Western Europe declined 27 percent to $140 million as revenue growth and lower selling and administrative expenses were more than offset by significantly lower gross margin due to unfavorable changes in currency exchange rates in addition to the factors which affected the company's overall gross margin.

Central and Eastern Europe

Reported fourth quarter revenues for Central and Eastern Europe increased 1 percent, but were down 1 percent on a currency neutral basis as higher revenues in Russia were offset by declines in most other territories. By category, currency neutral double digit revenue growth in Running, Basketball and Action Sports was more than offset by declines in other key categories, primarily Sportswear and Football (Soccer).

Compared to the same period last year, EBIT for Central and Eastern Europe decreased 15 percent to $69 million driven by lower gross margin and higher selling and administrative expenses.

Greater China

Revenues in Greater China during the fourth quarter increased 21 percent, up 16 percent excluding the impact of changes in currency exchange rates driven by expanding points of distribution and comp store sales increases. Revenues were higher on a currency neutral basis in all key categories except Football (Soccer) and Women's Training; the strongest growth came from Running, Sportswear, Men's Training and Action Sports, which were all up at double-digit rates for the quarter.

EBIT for Greater China was up 21 percent to $226 million driven by revenue growth and leverage of selling and administrative expense which more than offset a lower gross margin rate.

Japan

Japan's fourth quarter results were negatively impacted both by challenging macroeconomic conditions and the March earthquake and tsunami. As overall conditions in Japan stabilize, we will continue to focus on returning this market to profitable growth.

Japan's fourth quarter revenues declined 17 percent, down 26 percent excluding the impact of changes in currency exchange rates. Although revenues declined for most key categories, Running posted solid growth for the quarter.

Japan's fourth quarter EBIT was down 67 percent to $20 million as result of lower revenues, gross margin declines and higher selling and administrative expenses.

Emerging Markets

Fourth quarter revenues in the Emerging Markets geography were up 25 percent, with 6 points of benefit from changes in currency exchange rates. Currency neutral revenues were higher in nearly all key categories and territories, led by Argentina, Brazil, Korea and Mexico, which were all up at a double-digit rate for the quarter.

Emerging Markets' EBIT for the quarter grew at a faster rate than revenue, up 68 percent to $197 million due to stronger gross margin (as a result of positive changes in foreign exchange rates), leverage of selling and administrative expense and favorable impacts from foreign currency translation.

Other Businesses

Reported revenues for Other Businesses increased 6 percent, up 5 percent on a currency neutral basis, as double-digit growth at Converse, Cole Haan and Hurley more than offset declines at Umbro (which had tough comparisons to World Cup last year), and NIKE Golf, which experienced significant declines in its Japan business following the natural disasters in March.

Fourth quarter EBIT for our Other Businesses increased 13 percent to $81 million due to revenue growth and gross margin expansion.

Fiscal 2011 Income Statement Review

Revenues for NIKE, Inc. and the NIKE Brand were both up 10 percent to $20.9 billion and $18.1 billion respectively with minimal impact from changes in currency exchange rates. Excluding the impact of changes in currency exchange rates, NIKE Brand revenues were higher in all seven key categories and in every geography except Japan.

Revenues for our Other Businesses increased 9 percent with 1 percentage point of benefit from changes in currency exchange rates. Currency neutral revenues for the fiscal year were higher at Converse, Cole Haan, Hurley and Umbro, offset partially by a slight revenue decline at NIKE Golf.

Gross margin declined 70 basis points to 45.6 percent mainly due to higher product costs. Other factors contributing to this decline include elevated freight costs (including additional airfreight incurred to meet strong demand for NIKE Brand products) and a lower mix of license revenue due to the conversion of certain markets to direct distribution of the Converse and Umbro Brands. These factors more than offset the positive impact of growing sales at our Direct to Consumer operations, a higher mix of full-price sales and the benefits of ongoing product cost reduction initiatives.

See page 3 for more fiscal 2011 review