He said in a conference call with analysts, “The economic uncertainty we’re seeing in the world today is putting pressure on consumers around the world. [But] we continue to see solid growth in footwear and apparel sales, which tells me the growing middle class in developing markets is increasing consumption and consumers everywhere are ready to buy.”
He added, “ is going to be a very big year in sports, [with] the European championships and the London Olympics.”
Nike execs admitted gross margins will continue to be below year-ago levels in the near-term. But Nike Brand president Charlie Denson said, “We have excellent visibility into our supply chain, from the factory floor to sell-through for our largest retailers, and we’re making well-informed decisions about how we manage inventory positions to drive profitable growth.”
The firm’s first-quarter earnings topped expectations on Thursday. For the period ended Aug. 31, the Beaverton, Ore.-based athletic giant earned a net income of $645 million, or $1.36 a share, up 19 percent from last year’s $559 million, or $1.14. Analysts were predicting EPS of $1.21, as polled by Yahoo Finance.
Worldwide futures orders for Nike-brand products scheduled for delivery from September 2011 through January 2012 increased 13 percent, excluding currency changes year-over-year. That also beat analyst expectations.
While the company saw an 18 percent increase in revenue to $6.1 billion, it suffered a 270-basis-point decline in gross margin, due to higher product costs and more lower-margin sales.
Revenues were up on a currency-neutral basis in all key categories, except soccer, which had a challenging prior-year comparison due to the 2010 World Cup.
Inventories surged 41 percent to $3.1 billion, due to higher average unit product cost, growth in total units and changes in currency exchange rates. Unit inventories were higher as a result of strong demand and elevated product deliveries.
Nike ended the quarter with cash and cash equivalents of $1.6 billion, 20 percent less than a year ago, and long-term debt of $238 million.