) - a global leader in sports equipment and apparel - came up
with robust fourth-quarter and fiscal 2013 results, driven
primarily by strong demand for NIKE branded products. The
company's fourth-quarter earnings of 76 cents per share climbed
27% year over year and beat the Zacks Consensus Estimate of 74
cents. The year-over-year rise in the bottom line was primarily
due to increased revenues, improved margins, reduced tax rate and
a lower share count.
Quarter in Detail
Nike's total revenue grew 7% year over year to $6,697 million
and came ahead of the Zacks Consensus Estimate of $6,636 million.
In adjusting for the currency effect, the company's revenues
increased 9%. The year-over-year rise in revenues was primarily
driven by robust performances across all geographical regions,
except for Greater China and Western Europe. Moreover, the
company registered growth in all key categories, excluding
Sportswear, Action Sports and Football.
On a currency neutral basis, revenues for NIKE brands climbed
8%, while other businesses delivered 10% growth. Increase in
Nike's other businesses revenues were primarily led by strong
performances at Converse, NIKE Golf and Hurley.
Nike's quarterly gross profit grew 10% from the year-ago
quarter to $2,940 million, and gross margin expanded 110 basis
points (bps) to 43.9%. The margin expansion mainly resulted from
better pricing actions and lower material costs, partially offset
by increased labor expenses, higher discounts in Greater China
and adverse foreign exchange rates.
Selling and administrative expenses increased 7% to $2,022
million, primarily due to a rise of 19% in operating overhead
costs, partially offset by a decline of 13% for demand creation
expense. Overhead expenses rose due to increased investments in
the wholesale business and higher Direct to Consumer costs due to
new store openings and mounting expenses at existing stores.
Operating income for the quarter increased 18.8% year over
year to $918 million, while operating margin expanded 130 bps to
13.7%. The year-over-year expansion in margins was primarily due
to higher gross margin.
Fiscal 2013, in brief
In fiscal 2013, Nike's revenues shot up 8% to $25,313 million,
primarily driven by robust performances across all geographical
regions except Greater China. Moreover, the company's revenues
for the fiscal surpassed the Zacks Consensus Estimate of $25,280
million. Further, Nike's earnings for the fiscal surged 11% to
$2.69 per share from $2.42 in the comparable prior-year period
and outpaced the Zacks Consensus Estimate of $2.67.
Global inventories increased 7% at the end of fiscal 2013 to
$3,434 million, compared with $3,222 million at the end of fiscal
2012. The increase was primarily led by an 8% rise in NIKE Brand
inventories -including a 6% rise in wholesale unit inventories
and 2% due to change in foreign exchange rates and product
Nike, which competes with
Deckers Outdoor Corporation
Skechers USA Inc
), ended the fiscal with cash and short term investments of
$5,965 million, up approximately 59% from $3,757 million as of
May 31, 2012. Increase in cash and cash equivalents was a result
of proceeds from issuance of debt in the fourth quarter, sale of
Umbro and Cole Haan business, and a higher net income. Moreover,
the company has a long-term debt of $1,210 million and
shareholders' equity of $11,156 million at the end of fiscal
During the quarter, this Zacks Rank #3 (Hold) company
repurchased 4.2 million shares for about $242 million under its
$8.0 billion share repurchase program approved in Sep 2012. Since
the beginning of this new share repurchase program, Nike has
repurchased 15.3 million shares at a cost of nearly $789 million.
During fiscal 2013, Nike bought back 33.5 million shares for
nearly $1.7 billion.
Global future orders for footwear and apparel scheduled for
delivery from June through November this year were up 8% to $12.1
billion. The year-over-year increase in future orders was led by
12% increase in both North America and emerging markets,
14% in Central & Eastern Europe, 2% in Western Europe and 3%
in Greater China. Future orders in Japan declined 17%.
Major Events in Fiscal 2013
In an effort to cut costs and focus more on its NIKE, Jordan,
Converse and Hurley brands, Nike divested 2 of its brands - Cole
Haan and Umbro - during fiscal 2013.
The Umbro brand sold to
Iconix Brand Group Inc.
) at the end of 2012 garnered $225 million, while the sale of the
Cole Haan affiliate brand to Apax Partners generated $570
Nike is the pioneer in the U.S. footwear and athletic apparel
industry. In an attempt to broaden its global reach and market
share, Nike is aggressively expanding its operations in the
emerging markets while focusing on direct-to-consumer business
and other brands, which augur well for its future operating
performance. Year-to-date, Nike is strongly positioned, with
innovative products and services that had helped boost its top
and bottom lines. Moreover, the company's near-to-debt free
balance sheet offers financial flexibility to drive future
DECKERS OUTDOOR (DECK): Free Stock Analysis
ICONIX BRAND GP (ICON): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
SKECHERS USA-A (SKX): Free Stock Analysis
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