Nike (NKE) Q4 2005 earnings summary

Executive summary

• FY05 revenue rose 12% to $13.7B, net income increased 28% to $1.2B and diluted EPS grew 28% to $4.48; gross margin expanded 160 bps to 44.5%.

• FY05 met or surpassed long-term financial goals; revenue growth reflected international regions, U.S. operations and Other businesses, including the full-year Converse contribution.

Financial highlights

• Revenue was $13,739.7M, up 12%; gross profit was $6,115.4M, up 16%; income before tax was $1,859.8M, up 28%.

• FY05 net income was $1,211.6M versus $945.6M; diluted EPS was $4.48 versus $3.51.

• Q4 revenue was $3,721.4M, net income $349.5M and diluted EPS $1.30; Q4 FY04 figures were $3,487.1M, $305.0M and $1.13, respectively.

• Cash from operations reached $1,570.7M; cash and equivalents were $1,388.1M at May 31, 2005.

Outlook and guidance

• Long-term targets: high-single-digit revenue growth, mid-teens EPS growth, higher return on invested capital and accelerated cash flows.

• More favorable FY06 currency hedge rates were expected to support gross margin, with the greater benefit in H1.

• Worldwide footwear and apparel futures orders for June–November 2005 were 9.5% higher YoY; futures orders are not necessarily indicative of revenue growth.

• U.S. FY06 Q1 revenue growth was expected below the 9% futures-order increase; licensed apparel revenue was expected below prior-year levels due to the expired NBA license.