Nike Inc. (NYSE: NKE) announced significantly better-than-expected fiscal fourth-quarter 2018 results on Thursday after the market closed. The athletic footwear and sportswear giant highlighted not only sustained momentum from its international markets, but also a surprise early return to growth in North America.
With shares up 10% in after-hours trading as of this writing, let's dig in our heels to get a better look at what Nike accomplished over the past few months and what investors can expect from the company looking forward.
IMAGE SOURCE: NIKE.
Nike results: The raw numbers
Fiscal Q4 2018*
Fiscal Q4 2017
GAAP net income (loss)
GAAP earnings (loss) per diluted share
DATA SOURCE: NIKE, INC. *FOR THE QUARTER ENDED MAY 31, 2018.
What happened with Nike this quarter?
- For perspective, Nike's revenue arrived well above guidance provided last quarter, which called for high-single-digit percentage growth.
- Total NIKE Brand revenue increased 14% -- 9% at constant currency -- to $9.269 billion, including double-digit percentage growth in NIKE Direct, Sportswear, and Global Football.
- International NIKE Brand sales climbed in the double-digit range, including 24% growth in the EMEA (Europe, Middle East, and Africa) region, to $2.466 billion, a 35% increase in Greater China, to $1.468 billion, and a 12% boost in the Asia Pacific and Latin America region, to $1.436 billion.
- Nike Brand revenue in North America also climbed a surprising 3%, to $3.875 billion, above guidance for roughly flat sales from the same year-ago period. Recall last quarter, Nike told investors to expect North American sales to return to growth some time in the first half of fiscal 2019.
- Converse revenue declined 14% at constant currency, with growth in Asia only partially offsetting declines in other regions. Similar to last quarter, the decline was primarily driven by Nike's decision to rebalance wholesale distribution in North America and the EMEA region -- though Converse Direct sales climbed in the double-digit range during the quarter.
- Gross margin increased 60 basis points, to 44.7%, driven by higher average selling prices, favorable full-price sales mix, and margin expansion at Nike Direct.
- Nike repurchased 23.1 million shares for $1.6 billion during the quarter, leaving roughly $3.3 billion remaining under its original four-year, $12 billion program approved in November 2015.
- Today, Nike also announced a new four-year, $15 billion repurchase program to commence upon the completion of its existing buyback authorization.
What management had to say
"Our new innovation is winning with consumers, driving significant momentum in our international geographies and a return to growth in North America," stated Nike chairman and CEO, Mark Parker. "Fueled by a complete digital transformation of our company end-to-end, this year set the foundation for Nike's next wave of long-term, sustainable growth and profitability."
During the subsequent conference call, CFO Andy Campion added that Nike now expects revenue growth for the full fiscal-year 2019 to be in the high-single-digit range -- a slight increase from previous guidance calling for mid- to high-single-digit growth. Nike also anticipates that gross margin for the full year will expand by roughly 50 basis points "or slightly greater" (from 43.8% in fiscal 2018).
In the meantime, Nike expects revenue growth in the current fiscal first quarter to climb at the same high-single-digit level, with gross margin expanding at a slightly lower rate than its full-year guidance for the first half.
All things considered -- Nike's continued margin expansion, its sustained international strength, the massive new buyback program, and its early return to growth in North America -- this was as strong a quarter as Nike investors could have asked for. And it's hard to blame the market for bidding up the stock to all-time highs in response.
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