Nike Reports Strong Growth in Q1

Nike, Inc. kicked off the year with a double-digit growth in earnings, beating analyst estimates.


For the first quarter ended Aug 31, the Beaverton, Ore.-based company earned a net income of $559 million, up from $513 million in the same period a year ago. Earnings per share were $1.14, up 10 percent from $1.04.


Total revenue was $5.18 billion, up 8 percent from $4.8 billion a year ago. Footwear was the top revenue growth contributor in greater China and the emerging markets.


Analysts polled by Yahoo! Finance had expected earnings of $1.01 on revenue of $5.22 billion.


Nike’s gross margins also improved 80 basis points to 47 percent, which Nike’s VP and CFO, Don Blair, attributed to higher input costs impacting the firm later than expected. The firm expects a slightly tougher gross margin comparison for the second quarter.


“[There was also] strong consumer demand for our products in wholesale accounts and our own retail stores kept inventories lean, minimizing discounts and closeouts. These positive factors more than outweighed currency headwinds, as well as higher sourcing and airfreight costs,” added Blair.


Futures orders were also up 10 percent, or 13 percent on a constant-dollar basis, the highest increase in over a decade, the company said. As of the end of the quarter, worldwide futures orders, scheduled for delivery from September 2010 through January 2011, totaled $7.1 billion.


Charlie Denson, president of the Nike Brand, said demand creation is expected to grow at a single digit rate over the balance of the year.


“This exemplifies Nike’s momentum, and we would expect this to translate into some momentum in the shares,” said Mitch Kummetz, analyst at R. W. Baird.


Stifel Nicolaus analyst Jim Duffy said the combination of global futures strength, resurgent North America apparel growth and an accelerating China business “point to demand that is exceeding Nike’s ability to supply near-term. We view this as a high class problem and as capacity grows into demand, we see improving earnings power.”


“Going forward, we’ll continue to maximize the flexibility, balance and alignment that we have built into our portfolio of brands and categories. Those strengths will … help us leverage the global appetite for sports and innovation, which has never been stronger,” said Mark Parker, president and CEO of Nike.


Nike ended the quarter with cash and equivalents of $2.01 billion, down 12 percent from $2.26 billion a year ago, and long-term debt of $342 million, down 23 percent from $443 million.

Access exclusive content