Nike Shares Jump as Higher Prices Help Profit Beat Estimates

  • Worldwide futures orders rise 17 percent, topping expectations
  • Reductions in production and distribution costs boost earnings

Nike Inc. shares rose the most in a year after the world’s largest maker of athletic gear beat first-quarter earnings estimates, helped by higher prices and a lower tax rate.

Profit rose to $1.34 a share, excluding some items, the Beaverton, Oregon-based company said Thursday in a statement. Analysts estimated $1.19 on average, according to data compiled by Bloomberg.

Chief Executive Officer Mark Parker, who was tapped this year to succeed Nike co-founder Phil Knight as chairman, has expanded the shoemaker’s offerings of women’s apparel and bolstered its online operations. The company also increased its gross profit margin last quarter, with help from higher selling prices, and benefited from broad-based revenue growth. Nike’s effective tax rate was 18.4 percent, compared with 21.7 percent a year earlier.

“They’ve had a really nice run,” said Rob Plaza, an analyst at Key Private Bank. Investments the company has made in cutting production and
distribution costs are paying off, and expanding the gross margin has been “a big driver of the stock.”

The shares rose 8.9 percent to $125 on Friday in New York, the largest gain since Sept. 26, 2014. Nike has climbed 30 percent this year.

Futures Orders

Worldwide futures orders rose 17 percent, excluding the effects of foreign-currency exchange-rate fluctuations. Analysts estimated a 10.1 percent gain, according to data collected by Consensus Metrix. The measure is closely watched because investors view it as a proxy for future sales.

First-quarter net income rose 23 percent to $1.18 billion, or $1.34 a share, from $962 million, or $1.09, a year earlier. Revenue climbed 5.4 percent to $8.41 billion in the period, which ended Aug. 31. That beat analysts’ $8.22 billion average estimate.

Parker has solidified his role this year as successor to Knight and the company’s long-term steward. In June, Nike said that the 77-year-old Knight had recommended that Parker succeed him as chairman whenever he steps aside, which the company said was expected to happen in 2016.

The growth of futures orders in Europe, China, Japan and emerging markets also topped analysts’ projections last quarter. That’s soothed shareholders, who have seen shaky overseas economies and currency fluctuations threaten sales. They rose 27 percent in China, excluding currency, almost double the estimated rate.

Investors can breathe “a sigh of relief with the futures orders,” Plaza said.

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