Nike income tops Street
LOS ANGELES (Reuters) - Nike Inc (NKE.N) said on Wednesday that quarterly profit jumped 10 percent, topping Wall Street estimates, on strong international demand and higher margins, sending shares up 2 percent in after-hours trade.
The world's largest athletic footwear and apparel maker said net profit rose to $359.4 million, or 71 cents per share, for the fiscal second quarter ended November 30, from $325.6 million, or 64 cents per share, a year earlier. Sales increased 14 percent to $4.34 billion.
Wall Street, on average, expected earnings of 66 cents on revenue of $4.22 billion, according to Reuters Estimates. The Beaverton, Oregon-based company is known for its "swoosh" logo as well as brands like Converse, Hurley and Cole Haan.
"Revenue growth was great, especially in the U.S.," said McAdams Wright Ragen analyst Sara Hasan. "I think people were nervous about it with the retail environment we've had."
Nike, which recently announced it would buy British soccer brand Umbro Plc UMB.L, has been largely unaffected by a slump in demand for athletic shoes among U.S. mall-based retailers. The company's diverse number of brands, range of prices and sales that extend globally help it weather periods of slower spending, according to analysts.
Global orders for delivery of shoes and apparel from this month to April of next year rose 13 percent, Nike said, or 10 percent on a currency-neutral basis. That compared to the currency-neutral range of 8 percent to 10 percent expected by two analysts.
Although orders were up 19 percent, 24 percent and 21 percent in Europe, the Asian-Pacific region, and the Americas respectively, they edged up only 1 percent in the United States.
But Hasan cautioned the futures orders do not include about one-third of the company's products, including non-Nike brands.
Total revenue gained 7 percent in the U.S., 18 percent in the European region, 17 percent in the Asia Pacific region and 19 percent in the Americas region.
Other businesses, including Hurley, Exeter Brands and Nike Golf, saw 16 percent revenue growth, the company said.
Gross margins increased to 44.3 percent from 43.4 percent a year earlier.
Regarding the improved profit margins, Hasan said Nike was likely able to take advantage of strong revenue growth, leaner manufacturing, controlled inventory and supply chain initiatives.
"I'd be interested to know how they offset a sharp increase in oil prices," Hasan added.
Nike said it was still exploring the sale of its Nike Bauer Hockey division. In October, the company said it agreed to acquire Umbro in a deal that values the company at about $570 million.
Shares of Nike trade at 16.5 times estimated 2009 earnings, at a premium to its largest rival, Germany's Adidas AG (ADSG.DE), which trades at 14.5 times expected forward-looking earnings. Continued...
