* Second-quarter EPS $1.14 vs estimate $1.00
* Futures orders up 6 percent
* Futures orders in North America up 14 percent
By Nivedita Bhattacharjee
Dec 20 Nike Inc reported
forecast-topping quarterly profit on Thursday on strong North
American demand, and its orders volume indicated steady
worldwide demand. Its shares were up 6 percent after the bell.
Orders for Nike-branded shoes and clothing scheduled for
delivery from December 2012 through April 2013, known as futures
orders, were up 14 percent in North America, Nike's most mature
"In North America, we created great momentum. This is
somewhat counterintuitive to some, given this market size and
assumed maturity. But I see tremendous growth potential in North
America," Chief Executive Mark Parker said on a call with
Worldwide orders for the Beaverton, Oregon-based company
were up 6 percent, the same as last quarter.
"The biggest driver of this stock is usually futures orders.
Last quarter, futures orders were lower than expected. This
quarter they came in line, and North America was stronger than
expected," said Brian Yarbrough, consumer discretionary analyst
for Edward Jones.
Yarbrough also said the company's gross margins for the
quarter, though still down, exceeded expectations.
"If you go back a few quarters, gross margins have been down
a lot more. The less of a decline is positive," he said.
Nike's gross margins fell 30 basis points at the end of its
fiscal second quarter.
The company said it continues to expect gross margin
expansion in the fourth quarter of fiscal '13 with those coming
in more or less flat in the full year.
For the second quarter ended Nov. 30, the company earned
$384 million, or $1.14 a share, from continuing operations.
Analysts, on average, were expecting the company to earn $1 a
share, as per Thomson Reuters I/B/E/S.
Revenue rose 7 percent to $6.0 billion.
Nike had been caught with excess inventory in key markets
like China and was finding it difficult to tackle intense
competition and frequent promotional sales by local brands,
while distributors and retailers remain wary in an uncertain
"The China problem won't go away in 12-18 months, but it is
no worse than it was expected," said Rahul Sharma, founder and
managing director of Neev Capital, a London-based consulting
company. "But look at North America, it is on fire. And this is
such a big business."
On a call with analysts, finance head Don Blair said the
company "proactively canceled orders and reduced futures to
tightly manage the amount of new product flowing into the
(Chinese) market," so as to be able to handle the extra
inventory already present there.
The company taking such a hit to near-term futures orders
for a long-term benefit was a sign of strength for Sharma.
On Thursday, Nike said inventories for the second quarter
rose 9 percent, a much smaller rise than the 35 percent it saw
Nike shares were trading up at $104.75 after the bell. They
closed at $99 on the New York Stock Exchange.