Nike Beats Estimates, Blasts Through All-Time Highs

Running shoe and apparel giant Nike, Inc. (NKE) reported better than expected earnings Wednesday after the bell, vaulting shares higher during after-hours trading.  The Beaverton, Oregon based company broke through to all-time highs this past Monday, and this earnings beat should solidify their position at those lofty levels.  Nike beat on EPS and revenue, as the company reported $1.10/share on $4.96 billion in revenue vs. consensus estimates of $0.89/share on $4.59 billion.

The sizable beat could be an indication that recent positive retail sales data is the real deal, at least to an extent, as sales numbers came in better-than-expected all around the world.  North American revenue increased 1% on a 6% increase in apparel sales and Western European revenue increased 4% on an 8% increase in footwear sales.  Revenues out of emerging markets & China increased double-digits.  Moreover, gross margins expanded to 46.9% from 43.9%, primarily due to a roll-back in discounts and variations in the product mix.  Inventories were down 13%.

Nonetheless, it wasn’t all good, as sales dropped 7% in Japan and 8% in Central and Eastern Europe.  Furthermore, Nike’s robust results came on the heels off worse-then-expected results from two of its main rivals, Adidas and Puma.  The latter may be a positive or a negative for Nike, depending on the perspective you choose to take.  On the one hand, Nike may be prospering at the expense of its rivals, but one the other hand, Adidas’ and Puma’s weakness may be indicative of a retail climate that still has a ways to go.

Overall, things are looking good for Nike.  Whenever a company of its size hits an all-time high, it’s a meaningful event.  After all, it takes a lot of money to push a stock like Nike up as far as it has gone over the past month, indicating significant institutional sponsorship.  By the time the market opens Thursday, the stock may be almost 5% above its previous all-time highs, so you may want to exercise some caution before jumping right in.  However, if you believe the market is going to continue its uptrend over the short- to intermediate-term, it’s definitely feasible to think these shares can touch $80.

Disclosure: No holdings in NKE.