Nike Earnings Beat Estimates: Costs Fall, But Expenses Rise
Nike, Inc. (NYSE:NKE) closed the regular session down 0.37 percent at $78.26 per share on Thursday but edged fractionally higher in post-market trading after reporting second-quarter fiscal 2014 financial results. Revenues increased 8 percent on the year (+9 percent on a currency-neutral basis) to $6.43 billion, just shy of the mean analyst estimate of $6.44 billion. Earnings increased 4 percent on the year to 59 cents per diluted share, above the mean analyst estimate of 58 cents per share.
Cost of sales increased just 5 percent on the year while gross profit increased 12 percent, pulling Nike’s gross margin up to 43.9 percent from 42.5 percent in the year-ago period. Total selling and administrative expenses grew 14 percent, and now account for 32.5 percent of revenue, up from 30.8 percent in the year-ago period. Nike’s effective tax rate fell 170 basis points to 25.1 percent.
By region, Nike sales grew the most in Western Europe, climbing 18 percent to a total of about $1 billion, about 16.7 percent of total Nike brand revenues. Central and Eastern European sales grew by 17 percent to $295 million.
North American sales increased 9 percent to $2.8 billion, about 46.7 percent of total Nike Brand revenues. Sales in Greater China climbed 8 percent to $629 million. Sales in Japan declined 13 percent on the year to $210 million, while emerging market sales declined 4 percent to about $1 billion. Total Nike brand sales increased 7 percent on the year to $6 billion, accounting for about 93 percent of total revenue. Converse sales increased 14 percent on the year to $360 million.
All told, the results were pretty good for a company that has had a great year. Nike stock is up more than 60 percent this year to date, beginning the beginning the 52-week range at a low of $48.61 per share. Shares took a dive in December but are once again flirting with highs around $80.
Looking ahead, analysts are expecting third-quarter revenues to climb 8.8 percent on the year to $6.73 billion, and earnings to climb 6.9 percent to 78 cents per share. Full-year revenues are expected to increase 8.7 percent to $27.52 billion, and earnings are expected to increase 13.4 percent to $3.05 per share.