NIKE Inc reported Q3 2024 results reflecting a solid recovery trajectory amidst a competitive environment characterized by shifting consumer preferences and macroeconomic volatility. The company achieved $12.43 billion in revenue, marking a slight 0.3% year-over-year growth despite a promotional environment. This performance was bolstered by the successful launch of innovative products, particularly in their footwear category, where new updates are driving strong consumer interest. However, the business is recalibrating its strategic approach, sharpening its sport focus and enhancing wholesale partnerships. The CEO, John Donahoe, emphasized the need for adjustments in brand marketing, product innovation, and market engagement to align with consumer demands and drive sustainable growth going forward.
Key Performance Indicators
Revenue
12.43B
QoQ: -7.16% | YoY:0.31%
Gross Profit
5.56B
44.75% margin
QoQ: -6.85% | YoY:3.56%
Operating Income
1.34B
QoQ: -26.79% | YoY:5.36%
Net Income
1.17B
QoQ: -25.73% | YoY:-5.48%
EPS
0.77
QoQ: -25.96% | YoY:-3.75%
Revenue Trend
Margin Analysis
Key Insights
**Total Revenue**: $12.43 billion, up 0.31% YoY, down 7.16% QoQ
**Gross Profit**: $5.56 billion (44.8% margin), up 3.56% YoY, down 6.85% QoQ
**Operating Income**: $1.34 billion (10.8% margin), up 5.36% YoY, down 26.79% QoQ
**Net Income**: $1.17 billion, down 5.48% YoY, down 25.73% QoQ
**EPS**: $0.77, down 3.75% YoY, down 25.96% QoQ
Financial Highlights
### Revenue Performance
- Total Revenue: $12.43 billion, up 0.31% YoY, down 7.16% QoQ
- Gross Profit: $5.56 billion (44.8% margin), up 3.56% YoY, down 6.85% QoQ
- Operating Income: $1.34 billion (10.8% margin), up 5.36% YoY, down 26.79% QoQ
- Net Income: $1.17 billion, down 5.48% YoY, down 25.73% QoQ
- EPS: $0.77, down 3.75% YoY, down 25.96% QoQ
### Profitability Ratios
- Gross Margin: 44.8% (up from 43.3% YoY)
- Operating Margin: 10.8%
- Net Profit Margin: 9.4%
### Balance Sheet Health
- Current Ratio: 2.74
- Total Assets: $37.36 billion
- Total Liabilities: $23.13 billion
- Total Stockholders Equity: $14.23 billion
### Cash Flow
- Operating Cash Flow: $2.06 billion
- Free Cash Flow: $1.92 billion
- Cash at End of Period: $8.96 billion
### Strategic Initiatives
- Focus on innovation (Air technology) and optimizing wholesale partnerships
- Increased investment to enhance brand marketing campaigns
- Initiatives to improve direct consumer engagement.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
12.43B
0.31%
-7.16%
Gross Profit
5.56B
3.56%
-6.85%
Operating Income
1.34B
5.36%
-26.79%
Net Income
1.17B
-5.48%
-25.73%
EPS
0.77
-3.75%
-25.96%
Key Financial Ratios
currentRatio
2.74
grossProfitMargin
44.8%
operatingProfitMargin
10.7%
netProfitMargin
9.43%
returnOnAssets
3.14%
returnOnEquity
8.24%
debtEquityRatio
0.85
operatingCashFlowPerShare
$1.35
freeCashFlowPerShare
$1.26
dividendPayoutRatio
48%
priceToBookRatio
11.12
priceEarningsRatio
33.74
Net Income vs. Revenue
Expense Breakdown
Management Commentary
#### Key Themes from Management: 1. Innovation and Brand Strategy:
- John Donahoe highlighted, "We are back on our front foot with growing confidence in our innovation pipeline." This reinforces the company's commitment to rejuvenating its product lines and maintaining competitive advantage in footwear, especially with the upcoming Olympics as a catalyst for brand visibility.
2. Adjusting Market Focus:
- Donahoe stated, "We need to sharpen our focus on sport... and our brand marketing must become bolder and more distinctive." This clearly indicates management’s awareness of consumer shifting preferences and the need for a more defined market narrative to engage customers effectively.
3. Financial Discipline:
- CFO Matt Friend commented, "We executed well to recapture transitory cost headwinds and expand gross margins even in a promotional environment," suggesting operational efficiency improvements that may lead to better bottom-line results in subsequent quarters.
For the full year, we continue to expect revenue to grow approximately 1%. We now expect Q4 revenue to be up slightly...
— Matthew Friend
Current consumer trends indicate we need to elevate and differentiate the consumer experience with our brands at retail...
— John Donahoe
Forward Guidance
Management provided cautious guidance for the remainder of fiscal 2024, expecting revenue growth of approximately 1%. The transition into fiscal 2025 is anticipated to remain challenging with low single-digit revenue growth expected in the first half due to lifecycle management of key products. However, they expressed confidence that ongoing strategic initiatives could lead to improved performance as the year progresses, particularly through sustained innovation and enhanced marketing strategies.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
NKE Focus
44.75%
10.70%
8.24%
33.74%
DECK
58.70%
31.30%
18.50%
11.00%
ONON
59.90%
12.00%
5.37%
34.59%
SKX
52.90%
10.50%
3.68%
13.00%
SHOO
42.10%
15.00%
7.70%
8.99%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, NIKE Inc offers a compelling investment opportunity characterized by strong brand positioning and innovation capabilities. Given the projected metrics for revenue stabilization and operational improvements, combined with effective management strategies around product lifecycle and marketing, investors should closely monitor financial developments and market responses in the upcoming quarters. Continued focus on operational excellence and proactive engagement with wholesale partners will be critical for reinforcing growth strategies.
Key Investment Factors
Growth Potential
NIKE has a robust pipeline of product innovations, particularly in its Air technology segment, which is projected to become a multibillion-dollar yearly revenue driver and create substantial brand engagement during major events like the Olympics.
Profitability Risk
The potential headwinds from a promotional market environment and challenges in maintaining strong digital growth amidst lifecycle management transitions could dampen near-term revenue figures.
Financial Position
NIKE maintains a strong balance sheet with a current ratio of 2.74 and a healthy cash position of $8.96 billion, ensuring ample liquidity to manage operational dynamics and invest in strategic initiatives.
SWOT Analysis
Strengths
Strong brand equity and market recognition
Robust innovation pipeline in footwear technology (Air)
Diverse revenue streams across products and geographies
Weaknesses
Dependence on the wholesale channel for growth
Challenges in digital growth and inventory management
Limited performance in certain geographic regions compared to past quarters
Opportunities
Expansion into growing e-commerce markets and social commerce (like Douyin in China)
Leveraging major sporting events for brand exposure and consumer engagement
Increased focus on sustainable products as consumer preferences evolve
Threats
Industry-wide challenges from inflation and rising manufacturing costs
Intensifying competition in the athletic apparel market