Nike Turns in Strong Q3 Results

LOS ANGELES — After Nike Inc. blew past earnings projections and doubled its third-quarter profits, analysts tipped their hats last week to the company’s continued success in a difficult retail climate.

“Quite simply, this was an exceptional quarter, and [Nike] appears to be well positioned for 2011 and beyond,” Sterne Agee analyst Sam Poser wrote in a post-earnings note.

“We were encouraged by the better-than-expected gross profit, a return to constant currency futures growth and improvements in working capital,” Thomas Weisel Partners analyst Jim Duffy wrote in a report. “The company continues to leverage [its] strong market position during a difficult economic environment to position the company for further growth and share leadership as the economy recovers.”

Likewise, Christopher Svezia, an analyst at Susquehanna Financial Group, said the company’s success bodes well for future profits.

“We continue to believe that Nike’s dominant U.S. market share position in athletic footwear, its well-diversified brand portfolio and its strong financial position should allow it to navigate difficult macro conditions better than its competitors,” he wrote in an earnings note. “We look for more moderate sales and earnings growth in the medium term and expect continued investments over the next two quarters in excess of sales growth.”

For the three months ended Feb. 28, the company reported earnings of $496.4 million, or $1.01 a diluted share, compared with $243.8 million, or 50 cents, in the year-ago quarter. Analysts had expected earnings per share of 89 cents.

“Nike is more than a survivor in these tough economic times,” Nike President and CEO Mark Parker said during a conference call with analysts and investors. “We’re able to manage up and through the recession to expand separation for our brands and our businesses.”

Excluding year-ago after-tax noncash charges of $241 million for impairment of goodwill, intangible and other assets of its Umbro subsidiary, net income would have increased 3 percent for the period, the company said.

Revenues during the quarter rose 7 percent to $4.73 billion from $4.44 billion. Volume in the greater China region gained 10 percent to $458 million, and emerging markets jumped 43 percent to $509 million. North America inched up 1 percent to $1.7 billion, and Western Europe increased 4 percent to $929 million. Central and Eastern Europe saw an 8 percent decline in revenue to $272 million, and Japan posted a 7 percent drop to $213 million.

The company said worldwide futures orders for Nike brand athletic footwear and apparel set for delivery between March and July were $7.1 billion, 9 percent higher than the year-ago period.

Still, VP and CFO Don Blair said during the call that the retail market remains uncertain, which will require the company to maintain tight cost controls.

“While we’re more optimistic than 12 months ago, worldwide consumer confidence hasn’t recovered fully and we’ve not yet reached our normal revenue and profit growth trajectory,” he said. “That means we’ll keep a laser focus on delivering value to consumers and maintaining strategic financial and operational discipline.”

For the year, income gained 21 percent to $1.38 billion, or $2.81 a diluted share, from $1.15 billion, or $2.33, a year ago on reduced costs and inventory. Revenues fell 4 percent to $13.94 billion from $14.46 billion.

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