Nike Profit Tops Analysts’ Estimates on North American Sales

Nike Profit Tops Analysts’ Estimates as North America Sales Gain
A pair of Nike shoes in San Francisco. Photographer: David Paul Morris/Bloomberg

Nike Inc., the world’s largest sporting-goods company, reported third-quarter profit that topped analysts’ estimates as sales gained in North America.

Net income in the quarter ended Feb. 29 rose 7.1 percent percent to $560 million, or $1.20 a share, from $523 million, or $1.08, a year earlier, Beaverton, Oregon-based Nike said today in a statement. Analysts projected $1.17 a share, the average of 19 estimates compiled by Bloomberg. Nike’s profit has surpassed analysts’ projections in 22 of the past 23 quarters.

Nike, the maker of Air Jordan basketball shoes, has been using new products in categories such as running to lure consumers who are spending more on athletic gear across the industry. The strategy helped boost Nike sales 17 percent to $2.15 billion in North America, the company’s largest market.

“Demand behind the brand is continuing to stand very tall and accelerating a bit more,” Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri, said in an interview. “The other side of the equation is on the margin,” where higher prices eventually will help improve profit margins.

Nike rose 1.1 percent to $112.22 in extended trading at 7:33 p.m. in New York. The shares had gained 15 percent this year through the end of today’s regular trading.

Orders for the Nike brand from March to July, excluding currency exchange-rate changes, advanced 18 percent. Analysts projected a gain of 13 percent, the average of seven estimates. Orders for December to April rose 13 percent.

Gross Margin Narrows

Gross margin, or the percentage of sales left after the cost of goods sold, narrowed 2 percentage points to 43.8 percent from a year earlier. The company had projected a decline of 1.5 percentage points.

The measure has fallen for five straight quarters as Nike faces higher costs and the company forecast a sixth decline this quarter of 1 percentage point. The prices for labor continue to be pressured, while costs for raw materials are easing, Chief Executive Officer Mark Parker said on a conference call with analysts.

The company introduced widespread price increases in January and began cutting costs to help it increase gross margins in fiscal 2013, Chief Financial Officer Don Blair said on the call. Costs for labor, commodities and raw materials will continue to rise over the long term, and to combat that Nike will rely on innovation and brand strength, Blair said.

‘Getting Better’

Gross margin is “getting better, not quite as fast as we hoped, but it’s getting better,” Blair said.

Total revenue rose 15 percent to $5.85 billion, topping analysts’ projections of $5.82 billion.

Nike’s results follow large customers such as Dick’s Sporting Goods Inc. and Foot Locker Inc., which increased sales in the quarter ended Jan. 28. Revenue rose 6.1 percent at Dick’s, the largest U.S. sporting-goods retailer, and 7.9 percent at Foot Locker, the world’s largest athletic-footwear chain.

Sales at Adidas AG, the world’s second-largest sporting-goods maker, probably will increase “at a mid- to high-single-digit rate” this year, the Herzogenaurach, Germany-based company said March 7. Net income at Adidas, which reports results for the quarter ending March 31 on May 3, may rise as much as 770 million euros ($1.01 billion), the company said.


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