Analysts Applaud Nike’s Q1

Analysts are lauding Nike’s fiscal first-quarter results, as the Beaverton, Ore.-based company continues its hot streak.

“There was really not a lot for the bears to chew on here,” UBS Investment Bank analyst Michael Binetti said of the firm’s financial report. “It was a pretty impeccable quarter, with strength everywhere you wanted to see strength.”

Market watchers agreed that success in Europe was a major highlight for the athletic firm. Revenue growth increased 8 percent on a currency-neutral basis in Western Europe, while Central and Eastern Europe grew 10 percent.

In addition, Nike’s future orders came in 8 percent above the year-ago mark.

“The retailers in Europe are ordering a ton more Nike, and this is even before they place orders for the World Cup,” Binetti said. “That means the gross rate on orders will be even bigger when the World Cup orders get in there.”

Christopher Svezia, an analyst for Susquehanna Financial, agreed: “Western Europe was a surprise, given the macroeconomic backdrop. Clearly, product is moving well there.”

Morningstar Capital analyst Paul Swinand, however, expressed caution about any headway made in the region.

“[The success reported there] is a sign of positive things starting in Europe, but the question is when things can really start accelerating,” he said. “Especially when you watch a macroeconomic situation like that, you worry if it might be a false start.”

China had mixed results. Total revenues there declined 0.5 percent, to $574 million, with footwear specifically declining 4.5 percent, to $341 million.

New Nike Brand President Trevor Edwards said the company is still in the midst of shifting its retail strategy in the China market, as it did in Europe.

“I would say that our true intent in China is to make sure we drive a more productive and profitable retail,” Edwards said on the conference call. “And we believe that you do that by segmenting the market and creating greater differentiation.”

Net income for the three months ended Aug. 31 was $780 million, or 86 cents a diluted share — 37.6 percent above the year-ago level of $567 million, or 61 cents. Revenues rose 7.7 percent to $6.97 billion from $6.47 billion in the prior-year quarter. Gross margin was lifted 120 basis points to 44.9 percent of sales from 43.7 percent.

The company reported an 18.2 percent increase in quarterly revenue, to $494 million, and a 36.3 percent leap in operating profit, to $169 million.

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