Nike's profit tops estimates but margins dip on weak North America demand

Retail Reuters

Nike shares climb on Q2 earnings

FOX Business' Nicole Petallides reports on Nike's second-quarter earnings statement and what this means for sports retailers.

Nike Inc’s (NKE) growth in international markets helped the company’s quarterly profit and sales beat Wall Street estimates on Thursday, but a drop in gross margins indicated severe price competition in North America, its largest market.

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Shares of the world’s largest footwear maker were marginally down at $64.36 in after-market trading.

Nike’s second-quarter gross margins fell 1.2 percentage points to 43 percent due to stronger dollar and higher production costs, the company said.

The company’s selling and administrative expenses for the quarter rose 10 percent as it spent more on advertising to create demand in the muted North American market.

Fall in demand for its footwear and sports equipment in North America led to a 5 percent decline in revenue from the market but it was more than offset by increased demand from Greater China and European regions.

Quarterly revenue from Greater China rose 16 percent and European region 19 percent.

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Net income fell to $767 million, or 46 cents per share, in the quarter ended Nov. 30, from $842 million, or 50 cents per share, a year earlier.

Excluding one-time items, the Beaverton, Oregon-based company earned 46 cents per share on revenue of $8.55 billion.

Analysts on average had expected adjusted earnings of 40 cents per share and revenue of $8.39 billion, according to Thomson Reuters I/B/E/S.

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