Nike Inc. (NKE), the world's largest sporting-goods company, reported second-quarter profit that topped analysts' estimates as sales of running shoes surged in North America.
Net income in the quarter ended Nov. 30 rose 2.6 percent to $469 million, or $1 a share, from $457 million, or 94 cents, a year earlier, Beaverton, Oregon-based Nike said today in a statement. Analysts projected 97 cents a share, the average of 18 estimates compiled by Bloomberg. Nike's profit has surpassed analysts' projections in 21 of the past 22 quarters.
Nike has been trying to maintain profit growth amid higher raw-material and labor costs by increasing sales and raising prices. Total revenue rose 18 percent to $5.73 billion in the quarter. Nike-brand orders for December to April, excluding currency changes, advanced 13 percent, surpassing analysts' average projection for a 12.7 percent gain.
“The bottom line is it's a decent quarter,” with sales in North America and China exceeding expectations, said Chris Svezia, an analyst for Susquehanna Financial Group in New York. Nike repurchased more shares than expected and that may have helped them beat analyst projections, according to Svezia, who has a “neutral” rating on Nike shares.
Nike rose 2.9 percent to $96.30 at 6:59 p.m. in New York. The shares had gained 9.6 percent this year through the end of today's regular trading.
Sales in North America, Nike's largest market, rose 21 percent to $2.07 billion, led by sales of running shoes. Revenue from China increased 28 percent to $650 million. Revenue grew in every region except Japan.
Running Boom
“We haven't seen this much running since the boom in the 1970s,” Charles Denson, president of the Nike brand, said on a conference call with analysts.
Gross margin, or the percentage of sales left after the cost of goods sold, narrowed for a third straight quarter, declining by 2.6 percentage points to 42.7 percent.
That trailed the company's forecast for a drop of 2 percentage points as it discounted more than expected, Chief Financial Officer Donald Blair said on the call. Gross margin will narrow 1.5 percentage points in the third quarter.
Margin Pressure
“There's a lot of companies that are facing the same problem, it's industrywide,” said Matt Arnold, an analyst Edward Jones & Co. in Des Peres, Missouri. That would be more of a concern if Nike weren't growing sales and hadn't scheduled more price increases for early next year, said Arnold, who recommends buying Nike shares.
The results follow those of customers such as Dick's Sporting Goods Inc. and Foot Locker Inc. (FL), which increased sales in the quarter ended Oct. 29. Revenue rose 9.3 percent at Dick's, the largest U.S. publicly-traded sporting goods retailer, and 8.9 percent at Foot Locker, the world's largest athletic-footwear chain.
Sales for fiscal 2012 will increase more than forecast, rising by a mid-teen percentage, Blair said. In September, Nike predicted sales growth from low double digits to mid teens. The shoemaker will begin selling National Football League-branded apparel in April, taking over a license previously held by Adidas AG. (ADS)
