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Category: Stock Market and Nike Inc
Date: 27 August 2019 Stock Price: $82.25 We take a look at the latest financial results of Nike Inc. the sporting apparel and accessories group for the 4th quarter of their 2019 fiscal year
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About Nike Inc.
NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiary brands include Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories; and Hurley, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories
Financial overview of Nike's latest results
Numbers highlighted in the earnings report:
Numbers we are interested in: (for the quarter):
Nike Brand Revenues:
So footwear sales for Nike makes up 66.9% of the group's revenues, with clothing apparel making up 29.3% of the groups revenues (as at the 4th quarter of 2019).
- Delivered earnings per diluted share of $0.61, up 10.9%.
- Record second quarter sales of $752.5 million, up 6.5% year-over-year
- Positive same-store-sales of 1.5% at Famous Footwear
- On-track to deliver eighth consecutive year of positive back-to-school same-store-sales
- Continued to evolve portfolio, announcing partnership with Veronica Beard and relaunch of Zodiac
Numbers we are interested in: (for the quarter):
- Revenues $ 10.184 billion (up 4% from $ 9.789 billion for the same quarter of the previous year)
- Cost of sales: $5.551 billion (up 3% from $5.411 billion for the same quarter of the previous year)
- Gross profit: $4.633 billion (up 6% from 4.378 billion for the same quarter of the previous year)
- Gross margin: 45.5% (up 80 basis points from 44.7% for the same quarter of the previous year)
- Net income: $989 million (down -13% from $ 1.137 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.62 (down -10% from $ 0.69 for the same quarter of the previous year)
- Diluted number of shares outstanding: 1.607.5 billion (down from 1.641.2 billion for the same quarter of the previous year)
- Dividends declared per common share: $ 0.22 (up 10% from $ 0.20 for the same quarter of the previous year)
- Dividend for the full year: $0.86
- Dividend yield: 1%
- Cash and equivalents: $ 4.466 billion (up 5% from $ 4.249 billion for the same quarter of the previous year)
- Accounts receivable, ne:t $4.272 (up 22% from $3.498 billion for the same quarter of the previous year)
- Accounts receivable (money owed to the group) makes up 18% of their total assets
- Inventories: $5.622 billion (up 7% from $5.261 billion)
- Inventories makes up 23.6% of the group's total assets
- Shareholders’ equity: $9.040 billion
- Shareholders equity per share: $5.62
Nike Brand Revenues:
- Footwear $ 6.499 billion (up 6% from the same quarter of previous year)
- Apparel $2.845 billion (up 3% from the same quarter of previous year)
- Equipment: $354 million (up 5% from the same quarter of previous year)
- Total: $9.707 billion (up 5% from the same quarter of previous year)
So footwear sales for Nike makes up 66.9% of the group's revenues, with clothing apparel making up 29.3% of the groups revenues (as at the 4th quarter of 2019).
Nike's management commentary on the results and earnings guidance
BEAVERTON, Ore., June 27, 2019 - NIKE, Inc. (NYSE:NKE) today reported financial results for its fiscal 2019 fourth quarter and full year ended May 31, 2019. Fourth quarter revenue increased to $10.2 billion, up 4 percent on a reported basis and up 10 percent on a currency-neutral basis*. Full year revenue rose to $39.1 billion, up 7 percent on a reported basis and up 11 percent on a currency-neutral basis, as strategic investments in innovation and digital drove global consumer demand led by NIKE Direct in both periods. “FY19 was a pivotal year for NIKE as we continue to bring our Consumer Direct Offense to life throughout the marketplace,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our distinctive innovation and digital advantage led to accelerated growth across our complete portfolio, while our Brand fueled deeper relationships with consumers around the globe.”
Diluted earnings per share in the fourth quarter was $0.62 driven by revenue growth, strong gross margin expansion, and a lower average share count, partially offset by higher selling and administrative expense and a higher tax rate. Diluted earnings per share for the full year was $2.49. “Reflecting on our FY19 performance, it is clear that growth is paramount at NIKE, and that our strong growth is being driven by strategic transformation,” said Andy Campion, Executive Vice President and CFO, NIKE, Inc. “Amid foreign exchange volatility, our double-digit currency-neutral revenue growth and expanding ROIC showcase NIKE’s unrivaled ability to create extraordinary value for consumers and shareholders over the long term
Share Repurchases
During the fourth quarter, NIKE, Inc. repurchased 10.6 million shares for approximately $897 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of May 31, 2019, a total of 11.6 million had been repurchased under this program for approximately $986 million. In fiscal 2019, NIKE, Inc. repurchased a total of 54.3 million shares for approximately $4.3 billion under the above mentioned $15 billion program currently in use as well as the previous $12 billion program approved by the Board of Directors in November 2015.
Diluted earnings per share in the fourth quarter was $0.62 driven by revenue growth, strong gross margin expansion, and a lower average share count, partially offset by higher selling and administrative expense and a higher tax rate. Diluted earnings per share for the full year was $2.49. “Reflecting on our FY19 performance, it is clear that growth is paramount at NIKE, and that our strong growth is being driven by strategic transformation,” said Andy Campion, Executive Vice President and CFO, NIKE, Inc. “Amid foreign exchange volatility, our double-digit currency-neutral revenue growth and expanding ROIC showcase NIKE’s unrivaled ability to create extraordinary value for consumers and shareholders over the long term
Share Repurchases
During the fourth quarter, NIKE, Inc. repurchased 10.6 million shares for approximately $897 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of May 31, 2019, a total of 11.6 million had been repurchased under this program for approximately $986 million. In fiscal 2019, NIKE, Inc. repurchased a total of 54.3 million shares for approximately $4.3 billion under the above mentioned $15 billion program currently in use as well as the previous $12 billion program approved by the Board of Directors in November 2015.
Nike Inc (NYSE: NKE) stock price history
The image below shows the stock price history of Nike Inc for the last 5 years. And its been a gradual upward trend for the group's stock price with it trading at about $55 dollars 5 years ago, its currently trading at around $82 a share.
Nike Inc's (NYSE: NKE) stock valuation
So what do we value one of the worlds biggest clothing and apparel brands stock at? Based on Nike's latest financial results for the last quarter of their 2019 fiscal year and the numbers for the full 2019 fiscal year we value Nike stock at $61.50 a share. We therefore feel the group's stock is overvalued and would not advise long term fundamental investors to invest in Nike Inc shares at this point in time as the value proposition is not present in Nike at the moment.