NIKE posts revenue growth for Q2 2018
For the quarter, revenue growth was driven by international geographies and continued strength in NIKE Direct, which was partly offset by an expected decline in North America wholesale revenue.
Diluted earnings per share were $0.46, down 8 percent compared to the same period last year due primarily to a decline in gross margin and higher selling and administrative expense, which offset solid revenue growth, a lower tax rate and a lower average share count.
Revenues for NIKE, Inc. increased 5 percent to $8.6 billion, up 3 percent on a currency-neutral basis.**
Revenues for the NIKE Brand were $8.1 billion, up 4 percent on a constant-currency basis, driven by EMEA, Greater China and APLA, including growth in the Sportswear and NIKE Basketball categories.
Revenues for Converse were $408 million, down 4 percent on a currency-neutral basis, as international growth was more than offset by declines in North America.
Gross margin declined 120 basis points to 43.0 percent, as higher average selling prices were more than offset by unfavorable changes in foreign currency exchange rates and, to a lesser extent, higher product costs per unit.
Selling and administrative expense increased 10 percent to $2.8 billion. Demand creation expense was $877 million, up 15 percent, primarily driven by higher sports marketing and advertising costs. Operating overhead expense increased 8 percent to $1.9 billion, due largely to higher administrative costs and continued investments in NIKE Direct.
Other expense, net was $18 million as net foreign currency exchange losses were partially offset by non-operating items.
The effective tax rate was 12.7 percent, compared to 24.4 percent for the same period last year, reflecting the tax benefit from stock-based compensation in the current period, as well as an increase in the mix of earnings from operations outside of the U.S., which are generally subject to a lower tax rate.
Net income decreased 9 percent to $767 million as a decline in gross margin and higher selling and administrative expense more than offset revenue growth and a lower tax rate, while diluted earnings per share decreased 8 percent from the prior year to $0.46, including a 2 percent decline in the weighted average diluted common shares outstanding. ■