The company’s shares are at an all-time high, at $59.92, after the firm’s third-quarter results. And analysts are bullish on the firm moving forward.
“Nike proved itself. Prior concerns regarding the global health of the brand appear unfounded,” said Sam Poser, analyst at Sterne Agee.
John Zolidis, analyst at Buckingham Research Group, agreed: “The U.S. business showed strong momentum. China futures gained instead of contracting. Gross margins rose instead of falling. Average selling prices continue to rise.”
And while Camilo Lyon, analyst at Canaccord Genuity, said the firm’s valuation remains high, he acknowledged, “Nike is performing well.”
One area analysts were still concerned about, however, is China.
Susquehanna Financial analyst Christopher Svezia said, “The Chinese market clearly remains a concern, but the company appears to be managing the business well enough. Business trends will remain choppy over the next several quarters, and profitability will continue to lag despite favorable margin comparisons.”
Charlie Denson, Nike brand president, said the near-term focus is on aggressively clearing inventory from the marketplace.
“At the same time, we’re taking a harder look at our supply into the China market. This means re-phasing product flow and closely managing cancellations and at-once orders to more tightly control the volume of product going into the market. As a result of these efforts, reported revenues for China will look different than our third-quarter futures might indicate,” he told analysts on a call.
One of the brightest spots in Nike’s business is running, which saw third-quarter revenue grow double digits, while futures orders rose double digits in nearly every region.
“We’re on a roll [and we can] keep it up,” said Denson. “[Running is] a lifestyle, and we have the breadth and depth of innovation to serve [that customer’s] every need and to grow this business going forward. Bottom line, running is not a trend at Nike — it’s a commitment.”
For the period ended Feb. 28, Nike’s net income was $866 million, or 73 cents a share, compared with $560 million, or 61 cents. Excluding a gain on the sale of Cole Haan and Umbro, net income was $662 million.
Revenue advanced 9.4 percent to $6.19 billion, from $5.66 billion.
Analysts were expecting earnings per share to come in at 67 cents, as polled by Yahoo Finance.
By region and excluding the impact of changes in foreign currency, North America logged the strongest growth in revenues, at 18 percent. Central and Eastern Europe grew 13 percent; Western Europe 8 percent; and emerging markets 8 percent. Greater China fell 10 percent and Japan declined 6 percent.
By category, footwear grew 9 percent and apparel advanced 8 percent.
As of the end of the quarter, worldwide futures orders for Nike grew 6 percent year-over-year.
Cash and cash equivalents stood at $2.56 billion, and long-term debt was $161 million.