This summary is based on the second quarter fiscal 2008 earnings call conducted by NIKE Inc. (NKE) on December 19, 2007.
Management:
President and CEO: Mark Parker
VP of IR: Pam Catlett
President, NIKE Brand: Charlie Denson
VP and CFO: Don Blair
Key Investors Issues
- EPS were 71 cents a share compared to 64 cents a share last year.
- Profit rose to $359.4 million from $325.6 million a year earlier.
- Sales jumped to $4.34 billion from $3.82 billion a year ago.
Second Quarter Highlights
Revenues grew 14%, with 4 points of growth from the weaker dollar.
- On a reported basis, NIKE brand revenues grew 13%, as all four regions and all three product types delivered revenue growth.
- Revenues for the businesses reported as other is 16%.
- Futures order scheduled for delivery from December, 2007 through April, 2008 grew over 13% versus last year, driven by robust growth in each of international regions.
- Excluding currency changes, futures were up 10%.
- Pre-tax income grew 15%.
- Earnings per share grew 11% to 71 cents per share, reflecting a higher tax rate than last year''s second quarter, which was reduced by the recognition of a new international tax agreement.
Gross margins expanded 90 basis points versus the prior year, driven by better in-line pricing margins in footwear, better closeout management and faster revenue growth in high margin businesses.
- Currency changes had a minimal impact on gross margins. Over the past two quarters of fiscal 2008, the company delivered $738 million of free cash flow from operations, paid out a $185 million in dividends and repurchased $614 million of NIKE stock. Even so balance of cash and short-term investments totaled over $3 billion as of November 30th, over $6 a share on a gross basis and nearly $5 a share net of debt.
- Trialing 12 months return on invested capital was 23.5% up 240 basis points verses the end of the second quarter of fiscal 2007.
In European region, which includes the Middle East and Africa, revenues increased 18% with 10 points of growth from currency changes.
- Currency neutral footwear revenues increased 9%, apparel revenues were up 6% and equipment grew by 13%.
- On a currency neutral basis virtually every country in the EMEA region reported higher revenues.
- As a group, emerging markets were up 30% driven by strong results in Turkey, Russia and Greece.
- Revenues in the UK and Germany each grew at a double-digit rate while revenues in France grew at a high single-digit rate.
Futures orders for the EMEA region grew 13% in constant dollars, reflecting continued growth in nearly every country in the region.
Pre-tax income for the European region grew 37% to $230 million, driven by revenue growth improved gross margins, SG&A leverage and stronger European currencies.
In the Asia Pacific region, revenues increased 17%, including a five percentage point benefit from currency changes.
- Currency neutral revenues for Footwear increased 16% and Apparel grew 11%.
- Pre-tax income for Asia Pacific grew 19% to $174 million, driven by strong revenue growth, expanding gross margins and stronger currencies.
Asia''s revenue growth was driven by China where revenues increased 35%, on a currency neutral basis.
Growth in China has been driven by new store openings and double-digit comparable store sales growth fueled by brand doubling investments around the Beijing Olympics, basketball and NIKE+.
