Nike "Just Does It" In Fiscal-First Quarter
By Sam Lewis
Profits jump 33 percent for footwear maker
Nike became a member of the Dow Industrials earlier this week, but that’s a minor accomplishment compared to more recent news within the company. The famed footwear and apparel manufacturer registered stronger-than-expected figures in its first earnings report as a member of the Dow, reporting increases in global sales of 5 percent.
The company stated a profit of $780 million, or 86 cents per share last quarter. Last year in the same time frame, Nike reported $585 million, or 63 cents a share in profits. This far-exceeded the 78 cents per share expectations of analysts. The company fueled it profits by lowering costs of raw materials, and shifting revenue to higher margin products. Gross margins for the company expanded an entire percent during the quarter, to 43.7 percent, beating analysts’ predictions of 43.8 percent. Nike also said global future orders, a very important measure, increased 10 percent in the first-quarter, versus the 8 percent jump forecasted by analysts.
Beaverton, OR-based Nike experienced growth in all global areas, except China, where it fell three percent. That’s not stopping Nike from being optimistic about its future in China, though, as the company plans on making changes in that market. Nike is taking “decisive action to reset this market,” says brand president Trevor Edwards. “The race in China is a marathon, not a sprint, and we're set up for the long run.” Sales in Western Europe have rebounded from tough economic times by bouncing up 8 percent versus last year. Central and Eastern Europe did well also, with both markets seeing jumps in revenue of 10 percent in the last year. Domestically, overall sales jumped 9 percent in a year, with a 13 percent increase in equipment sales.
The World Cup, a worldwide soccer championship, will be held in Brazil next June, and it presents Nike an excellent opportunity to continue expanding its brand and boost sales overseas. “We intend to build upon our position as the leading soccer brand in the world,” says Edwards. This may also coincide with Nike’s German competitor and famed soccer brand, Adidas, lowering its full year sales forecast.