NIKE, Inc. Form 10-Q Summary
Period: The filing covers the fiscal quarter and nine months ended February 28, 2022. The request metadata says “2021 Q3,” but the filing itself is for NIKE fiscal 2022 Q3.
Financial performance
| Metric | Quarter ended February 28, 2022 | Nine months ended February 28, 2022 |
|---|---|---|
| Revenue | $10.871 billion, up 5% reported and 8% currency-neutral | $34.476 billion, up 7% |
| Gross profit / margin | $5.067 billion / 46.6%, versus 45.6% | $15.976 billion / 46.3%, versus 44.4% |
| Net income | $1.396 billion, down 4% | $4.607 billion, up 9% |
| Diluted EPS | $0.87, down 3% | $2.85, up 9% |
| Operating cash flow | Not separately stated for the quarter | $4.037 billion, versus $4.645 billion |
Quarterly selling and administrative expense rose 13% to $3.438 billion, reaching 31.6% of revenue versus 29.4%. Nine-month expense rose 16% to $10.769 billion. Quarter income before taxes increased 2% to $1.670 billion, while the effective tax rate rose to 16.4% from 11.4%; the nine-month rate was 12.7% versus 12.3%.
Balance sheet and liquidity
At February 28, 2022, cash and equivalents were $8.704 billion and short-term investments were $4.763 billion, totaling $13.467 billion. Long-term debt was $9.418 billion, with no current debt or commercial paper borrowings outstanding. Current assets were $26.962 billion and current liabilities $8.818 billion. Inventories rose to $7.700 billion from $6.854 billion at May 31, 2021.
Nine-month investing cash outflow was $1.711 billion and financing cash outflow was $3.456 billion. NIKE repurchased $2.923 billion of shares and paid $1.356 billion in dividends during the period. Management said available liquidity and operating cash generation should meet foreseeable capital needs.
Material changes and business drivers
- NIKE Direct grew 15% reported in the quarter, representing about 44% of NIKE Brand revenue; digital commerce sales were $2.7 billion versus $2.2 billion.
- Greater China revenue fell 8% currency-neutral in the quarter and 11% for the nine months, with lower digital and store sales amid COVID-related restrictions and marketplace challenges. North America, EMEA and APLA grew.
- Gross margin expanded, helped by NIKE Direct margins, fewer promotions, full-price sales mix and currency. Freight, logistics and product costs pressured margins; management cited elevated transport and fulfillment costs.
- Operating cash flow declined year over year, primarily as working capital reduced cash by $1.350 billion, including an unfavorable inventory impact. Supply-chain delays increased in-transit inventory and constrained available product.
- Foreign-currency-related other income improved results; nine-month other income was $235 million versus $18 million of expense in the prior year period.
Outlook, risks and unusual items
Management gave no specific numerical revenue or earnings guidance in the supplied filing text. It expects supply-chain constraints, extended transit times, elevated logistics costs and higher product costs to continue, with inventory supply significantly lagging consumer demand for at least the remainder of fiscal 2022. The company intends to maintain multi-year investments in digital transformation and brand campaigns and said its Consumer Direct Acceleration strategy remains directed toward its fiscal 2025 goals.
Key risks include further COVID-19 disruption, factory closures or workforce absences, store restrictions, supply-chain bottlenecks, inventory shortages or excesses, and volatile tax rates. NIKE also highlighted uncertainty around China’s data and personal-information laws. U.S. tax regulations increased the effective tax rate; the IRS was auditing fiscal 2017–2019, and the European Commission’s investigation into Dutch tax rulings remained unresolved. NIKE continued to plan the sale of its Argentina, Chile and Uruguay entities and recorded a cumulative expected net loss of $344 million related to that transaction. Subsequent to quarter-end, it entered into new committed credit facilities of up to $1 billion and $2 billion, respectively; neither was drawn as of April 5, 2022.
Important facts for investors to verify
- Whether supply and transit constraints ease as anticipated, and how inventory growth affects sales and cash conversion.
- Whether Greater China demand and NIKE Direct trends recover, and whether reported growth remains supported by unit volumes as well as higher selling prices.
- Whether freight, logistics and product-cost inflation offset further gross-margin gains.
- How U.S. tax regulations, tax audits and the Netherlands State Aid investigation affect future tax expense or liabilities.
- Progress, timing and final financial impact of the planned Argentina, Chile and Uruguay transaction, alongside continued buybacks and dividends.