Nike’s 3Q Numbers Take Off Running
Worldwide sales of Nike (NYSE:NKE) apparel jumped 55 percent for the fiscal third quarter, the company reported, sending its stocks soaring over 10 percent in the markets. An unexpected gross margin gain and the sale of the Cole Haan brand were cited as catalysts for the company’s strong performance.
“The Nike brand continues to expand the market and gained share in North America,” President and Chief Executive Mark Parker told analysts during a conference call. “In China, we are seeing progress against our strategy to reset the marketplace, but we still have more to do before we can capture its long-term growth potential.”
North American sales surged 18 percent, and notably picked up in Europe as well despite economic headwinds. The strong performance in the western regions helped offset declines in Asia, notably China and Japan, the Wall Street Journal reported.
The athletic apparel industry in North America has been growing impressively over the last few years, and Nike has been leading the trend by offering new colors and new fabrics to the market. Flyknit running shoes, Nike+ FuelBand movement-tracking wristbands and apparel tied to a National Football League contract have helped drive Nike’s sales.
Nike’s gross margins rose from 43.9 percent to 44.2 percent, its first positive growth in two years. The growth was due to higher prices and easing material costs, offsetting a jump in labor expenses, the company said.
Future orders were up 7 percent excluding currency, surprising analysts who did not think the company could outperform its futures last year, when it had the London Olympics and a new NFL contract under its belt.
China seemed to be the only aspect of the business that was not experiencing significant growth. Future orders grew only 3 percent excluding currency, which was welcomed news following two quarters of declines, but sales fell by 10 percent, and outlook for the remainder of the fiscal year looks bleak in regards to improvement. To address the issue, Nike is revisiting its offerings to make adjustments to better suit consumer tastes.
Profits went from $560 million for the third quarter last year to $866 million this year, or $0.61 to $0.73 on a per share basis, the company reported. The sale of the Cole Haan line contributed $231 million to the total.
Company projections for the year remained unchanged, and for the fourth quarter, Nike expects sales to rise in the mid-single-digit rate, while gross margins are expected to slightly expand.
At 11:30 AM EST, Nike shares were up 11.85 percent, to 59.96, or $6.36.