* Q3 EPS $1.01 vs Street view 89 cents
* Q3 revenue up 7 percent to $4.7 billion
* Sees Q4 revenue up in mid- to high-single digits
* Shares up 3.4 percent
(Adds executives' comments, details from conference call)
By Alexandria Sage
SAN FRANCISCO, March 17 Nike Inc (NKE.N) posted
a return to sales and profit growth on Wednesday and forecast
higher expected orders around the world after a year of
declines, sending its shares up more than 3 percent.
The largest global sports gear maker beat Wall Street
expectations in its third quarter, fueled by fueled by fatter
profit margins, supply chain improvements and improved demand
around the world, especially in the United States and China.
Nike has been struggling to offset revenue declines in
mature markets and even fast-growing young markets, as
consumers slash discretionary spending in a downturn, with deep
But analysts say the latest results, as well as an estimate
for growth in orders this fiscal quarter, pointed to a revival
of topline and bottomline growth.
"We're more than a survivor in these tough economic
times, said Chief Executive Mark Parker, citing market share
gains, the company's tight supply chain and improvement in
product, especially in its previously underperforming apparel
"I think what you (will) see in the third quarter is the
profit and balance sheet implications of running a tight supply
chain," Chief Financial Officer Don Blair told analysts on a
Executives said the company had still not reached its full
"We have not yet reached our normal revenue and profit
growth trajectory," Blair said, adding fourth-quarter revenue
would rise in the mid- to high-single digits on a percentage
Nike posted a 6 percent gain on a constant currency basis
in futures orders -- a closely watched data point that measures
the delivery of goods to retailers through July -- that beat
Wall Street expectations. That gain compared to a 1 percent
decline in the second quarter.
"That's the first thing people look at as a headline," said
Stifel Nicolaus analyst Thomas Shaw. "That's strong and that's
putting them ahead of the direction that Puma (PUMG.DE) and
Adidas ADSG.DE, their two biggest competitors, were
indicating sales would be for 2010."
SINGLE BIGGEST OPPORTUNITY
Net income in the third quarter ended Feb. 28 was $496
million, or $1.01 cents per share, double the $244 million, or
50 cents per share, in the year-earlier period, when a $241
million charge related to its Umbro acquisition crimped
Analysts, on average, had been expecting earnings of 89
cents per share, according to Thomson Reuters I/B/E/S.
Excluding the year-ago charge, net income would have
increased 2 percent, the company said.
Revenue jumped 7 percent to $4.7 billion. Excluding
currency fluctuations, revenue edged up 2 percent.
By region, revenue in North America -- the company's
largest market -- inched up 1 percent and fell 8 percent in
Central and Eastern Europe.
Revenue in China and Japan rose 10 percent and fell 7
percent, respectively. Nike posted a 43 percent revenue gain in
its emerging markets region, which includes Brazil.
Non-Nike branded units, which include Converse, Hurley and
Umbro, posted a 13 percent revenue gain.
Gross margins improved to 46.9 percent of sales from 43.9
percent in the year-ago quarter, helped by fewer clearance
sales, lower freight costs and a better product mix.
At the same time, selling and administrative costs rose 16
percent, due to more marketing spending in advance of this
year's World Cup in South Africa, higher performance-based
compensation and investment in the company's owned stores.
Calling apparel the single biggest opportunity for Nike,
Parker said lagging sales would be helped by "fewer, more
productive styles," Parker said. Sales in the category, where
the company has focused its efforts over the past year, rose 6
percent in the quarter in the United States.
"We're beginning to see leverage and robust long-term
growth opportunities," said Nike Brand President Charlie
Denson addressed the toning footwear craze, led by footwear
companies Skechers (SKX.N) and Adidas' Reebok, which purport to
tone without training. While suggesting the company's focus is
elsewhere, Denson said Nike would launch in competing product
line in the coming months.
Nike shares rose 3.5 percent to $73.35 after closing at
$70.88 on the New York Stock Exchange.
(Editing by Edwin Chan Andre Grenon, Leslie Gevirtz)