Nike has a profitable first quarter 2020

Nike’s profit and revenue grew in the first quarter of FY 2020.

 

Nike Q1 2020 revenue and net income

Nike was off to a robust start in fiscal 2020. The leading sports shoe and apparel brand of the world had a profitable q1, 2020. Its revenue and net income grew compared to the same period last year. The company experienced revenue growth across all geographic regions. Nike’s revenue was up 7 percent on a reported basis and 10 percent on a currency neutral basis. Revenue for first quarter 2020, reached $10.7 billion compared to $9.965 billion during the same period last year.

According to Nike CEO Mark Parker, the robust start of FY 2020 is a sign of the depth and balance of Nike’s complete offense.  Its focus upon product innovation and creating outstanding digital experiences has led to strengthening consumer relationships globally. The Chief Financial Officer of Nike noted that the strategic investments the brand had made in digital technology over last several years have strengthened its competitive advantage. Nike expects its growth rate to continue in future based upon the company's focus upon serving its customers better. For last some years, Nike has been investing in digital technology and product innovation. Its main focus was to bring better products to the market and deepen its customer connection.


While Nike’s revenue grew 10 percent on a currency neutral basis, revenue from Converse also grew by 8 percent on a currency neutral basis during the first quarter of FY 2020. Revenue from Converse declined in the US during q1 of fiscal 2020, but grew from Asia and other parts of the world. Digital drove the revenue growth of Converse in most parts of the world including Asia. Nike earned $555 million in revenue from Converse in Q1 2020. Gross margin of Nike grew 150 basis points (1.5%) in q1 2020 compared to the same period last year. Gross margin of Nike reached 45.7% against 44.2% during the first quarter of the previous year driven mainly by margin expansion in Nike Direct and higher average selling prices.

There was an impressive growth in the net income of  Nike during the first quarter of FY 2020. Net income rose 25% reaching $1.4 billion from $1.1 billion during the same period last year. Gross profit for the first quarter of fiscal 2020 grew 11% compared to the same period last year, rising to $4.9 billion from $4.1 billion. Nike’s income before income taxes was $1.56 billion compared to $1.3 billion during the first quarter last year. Its earnings before interest & taxes grew by 23% in the first quarter of 2020, reaching $1.58 billion compared to $1.3 billion in Q1 2019.


Nike Sales by Category Q1 2020.


Footwear accounted for the largest part of Nike’s total revenue. Total net revenue from footwear grew 8% in the first quarter of 2020. Footwear revenue rose to $6.5 billion in Q1 from $6 billion during the same period last year. From North America alone, Nike generated $2.67 billion, 4% higher compared to the first quarter of the previous year. Footwear revenue from Greater China saw the highest increase, rising by 22% against the first quarter of the last fiscal year. Revenue from apparel and equipment grew 6% and 8% respectively. Revenue from apparel reached $3.1 billion in the first quarter of 2020 compared to $2.95 billion in the first quarter last year. Revenue from equipment grew to $448 million from $416 million in first quarter of fiscal 2019.  

Nike Inc's revenue by product categry q1 2020.

Amounts are in millions.

CategoryQ1 2020Q1 2019% growth
Footwear$6,521$6,0368%
Apparel$3,121$2,9496%
Equipment$448$4168%
Global brand divisions$6$16-63%
Total Nike Inc.$10,096$9,4177%


Nike Revenue by Market 

Nike’s business is divided by geographic regions into four key markets including :

  1. North America (NA) 
  2. Europe, Middle East and Africa (EMEA)
  3. Greater China
  4. Asia Pacific and Latin America (AP & LA)

North America is the largest market of Nike products accounting for around 40% of the brand’s total revenue during the first quarter of 2020.  Greater China is the only region that saw double digit growth in the first quarter of 2020 compared to the same period last year. Nike’s revenue from North America grew by 4% in the first quarter of 2020 compared to the same period last year and that from Europe, Middle East & Africa by 6%. On the other hand, Nike’s revenue from Greater China grew by 22% compared to the first quarter of 2019.  Asia Pacific and Latin America saw a growth of 6% compared to the first quarter of last year.

Nike Inc's revenue by geographical regions Q1 2020.

Amounts are in millions.

Market regionQ1 2020Q1 2019% growth
North America$4,293$4,1454%
EMEA$2,773$2,6076%
Greater China$1,679$1,37922%
AP & LA$1,3451,2706%

 Nike Costs & Expenses Q1 2020.

There was a slight increase of around 4% in the total costs of sales of Nike Inc. Total cost of sales of Nike Inc grew to $5.8 billion in the first quarter of 2020 compared to $5.55 billion during the same period previous year. The marketing expenses (demand creation expenses) of Nike Inc grew by 6% during the same period. From $964 million during the first quarter of 2020, the demand creation expenses of Nike Inc grew to $1,018 million. Total selling and administrative expenses of Nike Inc grew to $3.33 billion in the first quarter of 2020 from $3.06 billion in the first quarter of 2019. 

Nike repurchased 11.9 million shares for around $995 million in the first quarter of 2020 as a part of its  four year long share repurchase program, approved by its Board of Directors in June 2018. By August 2019, the company had repurchased total 23.5 shares worth around $2 billion as a part of this program.