NIKE reported fiscal 2016 financial results for its fourth quarter and full year ended May 31, 2016.
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Strong global demand fueled revenue increases across nearly all geographies in fiscal 2016, while robust international revenue drove growth in the fourth quarter.
Diluted earnings per share for the quarter were $0.49 as international momentum and a lower average share count were offset by a higher tax rate; a gross margin decline partially due to the clearance of excess inventory in North America; and higher selling and administrative expense.
Fiscal 2016 diluted earnings per share rose 17 percent to $2.16, reflecting revenue growth of 6 percent, gross margin expansion, a lower tax rate and a lower average share count.
Q4 Revenues for NIKE, Inc. rose 6 percent to $8.2 billion, up 9 percent on a currency-neutral basis.
Gross margin declined 30 basis points to 45.9 percent as higher average selling prices were more than offset by higher product costs, the negative impact of clearing excess inventory in North America and unfavorable changes in foreign currency exchange rates.
Selling and administrative expense increased 7 percent to $2.8 billion. Demand creation expense was $873 million, up 7 percent, reflecting investments in digital demand creation, sports marketing and brand events which were partially offset by lower advertising expense.
Operating overhead expense increased 7 percent to $1.9 billion, reflecting continued growth in the Direct-to-Consumer (DTC) business, and targeted investments in operational infrastructure and consumer-focused digital capabilities.
Other income, net was $58 million, primarily comprised of net foreign currency exchange gains. For the quarter, the company estimates the year-over-year change in foreign currencyrelated gains and losses included in other income, net, combined with the impact of changes in exchange rates on the translation of foreign currency-denominated profits, decreased pretax income by approximately $66 million.
The effective tax rate was 21.2 percent, compared to 17.8 percent for the same period last year, primarily due to adjustments in the prior year to reduce tax expense recognized in the interim quarters of fiscal 2015 on intercompany transactions.
Net income decreased 2 percent to $846 million as revenue growth was more than offset by lower gross margin, higher selling and administrative expense and a higher tax rate, while diluted earnings per share remained unchanged from the prior year at $0.49 reflecting a 2 percent decline in the weighted average diluted common shares outstanding.
Fiscal 2016
Revenues for NIKE, Inc. rose 6 percent to $32.4 billion, up 12 percent on a currency-neutral basis.
Gross margin expanded 20 basis points to 46.2 percent primarily driven by higher average selling prices and growth in the higher margin DTC business which were partially offset by higher product costs, the negative impact of foreign currency exchange rates, and the impact from clearing excess inventory in North America.
Selling and administrative expense grew 6 percent to $10.5 billion. Demand creation expense was $3.3 billion, up 2 percent, reflecting investments in DTC marketing, brand events and sports marketing, which were partially offset by lower advertising expense.
Operating overhead expense increased 8 percent to $7.2 billion due to the expanding DTC business, and targeted investments in operational infrastructure and consumer-focused digital capabilities.
Other income, net was $140 million for the fiscal year, mainly comprised of net foreign currency exchange gains.
For the year, the company estimates the year-over-year change in foreign currency-related gains and losses included in other income, net, combined with the impact of changes in currency exchange rates on the translation of foreign currencydenominated profits, decreased pretax income by approximately $423 million.
The effective tax rate was 18.7 percent, compared to 22.2 percent in the prior year, primarily due to an increase in the proportion of earnings from operations outside of the United States, which are generally subject to a lower tax rate.
Net income increased 15 percent to $3.8 billion reflecting strong global revenue growth, gross margin expansion and a lower tax rate. Diluted earnings per share increased 17 percent to $2.16, reflecting growth in net income and the additional benefit of a decline in the weighted average diluted common shares outstanding. ■