Nike (NKE) Q4 1997 earnings summary

Executive summary

• FY1997 set records for revenue and net income; revenue rose 42% and net income rose 44% YoY.

• Revenue and net income had increased for 13 and 11 consecutive comparable quarters, respectively.

Financial highlights

• Revenue was $9,186,539 thousand, vs. $6,470,625 thousand in FY1996; net income was $795,822 thousand, vs. $553,190 thousand.

• Net income per common share was $2.68, vs. $1.88; gross margin reached a record 40.1%, exceeding 40% for the first time.

• Q4 revenue was $2,373,931 thousand and net income was $155,754 thousand; Q4 1996 revenue was $1,852,067 thousand and net income was $133,727 thousand.

• Selling and administrative expense was 25.1% of revenue, up from 24.6%; interest expense increased $12.8 million YoY.

• Other income/expense was a net expense of $32.3 million, vs. $36.7 million in FY1996; it included an $18.1 million one-time Bauer restructuring charge.

Outlook and guidance

• Worldwide futures and advance orders for June–November 1997 were $4.9 billion, 18% above the comparable prior-year period; ~95% were expected to be filled, though orders may be canceled.

• FY1998 revenue growth was expected to benefit from strong global NIKE-brand demand, with reduced U.S. growth rates given the existing market share.

• FY1998 gross margins could face pressure from higher product costs, added infrastructure costs, and more lower-priced and close-out product sales.

• FY1998 capital expenditures were projected at ~$680 million, primarily for headquarters, NIKETOWN stores, and warehouse expansion in the U.S., Japan, and Korea.