Nike (NKE) Q4 2008 earnings summary

Executive summary

• FY08 revenue $18,627.0m, up 14% YoY; net income $1,883.4m, up 26%; diluted EPS $3.74, up 28%.

• Q4 revenue was $5,088.0m vs. $4,383.2m; net income $490.5m vs. $437.9m; diluted EPS $0.98 vs. $0.86.

• Growth spanned all four geographic regions and all three NIKE brand product units; international regions drove most constant-currency growth.

Financial highlights

• FY08 gross margin was $8,387.4m, or 45.0%, up 110 bps YoY; S&A rose 18% to $5,953.7m, reaching 32.0% of revenue.

• Income before taxes increased 14% to $2,502.9m; effective tax rate fell to 24.8% from 32.2%, including a one-time $105.4m tax benefit.

• Reported results included $35.4m net-of-tax gains from Starter and Bauer Hockey divestitures, $13.3m net-of-tax Umbro operating losses, and the one-time tax benefit.

• Operating cash flow was $1,936.3m; cash and equivalents ended FY08 at $2,133.9m.

Outlook and guidance

• Long-term goals remain high-single-digit revenue growth, mid-teens EPS growth, higher return on invested capital and accelerated cash flow; FY08 met or exceeded these goals.

• FY09 S&A is expected to grow faster than revenue, driven by demand creation and investments around the Beijing Olympics, European Football Championships, athletes and teams.

• June–November 2008 worldwide footwear and apparel futures and advance orders exceeded the comparable prior-year period by 11%; currency contributed ~3 percentage points, with unit growth driving the remainder.

• June–November 2008 futures and advance orders totaled $8.8bn vs. $7.7bn a year earlier; ~95% were expected to ship in-period, but orders are not necessarily indicative of revenue.