New Dow Member Nike Scores 1Q EPS Beat as Margins Expand

By FOXBusiness

Nike (NYSE:NKE) beat the Street on Thursday with a 33% leap in fiscal first-quarter profits as the global footwear and apparel maker enjoyed stronger gross margins and solid sales at home and abroad.

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The stronger-than-expected report technically marks the first earnings report by a member of the Dow Industrials, which Nike joined earlier this week. Alcoa (NYSE:AA), which traditionally kicks off earnings season, isn't set to report results until October 8.

Despite reporting revenue that only met expectations, Wall Street bid Nike’s shares almost 6% higher in extended trading.

“This is a very high quality beat,” Corinna Freedman, vice president of equity research at Wedbush Securities, told FOX Business.

Nike said it earned $780 million, or 86 cents a share, last quarter, compared with a profit of $585 million, or 63 cents a share, a year earlier. Analysts had been calling for EPS of 78 cents.

Revenue rose 8% to $6.97 billion, matching the Street’s view.

Nike said its global futures orders, a closely-watched metric, jumped 10% last quarter, compared with a call from analysts for 8%. North American orders climbed 12%, besting forecasts for 9.9%. Inventories were up 6% as of the end of August.

Thanks to lower raw material costs and a revenue shift to higher margin products, Nike said gross margins expanded to 44.9% from 43.7%. Analysts had been calling for slower growth to 43.8%.

Freedman called the margin expansion “significant,” especially given recent foreign-exchange fluctuation struggles. “This is a nice inflection point for the company,” she said.

Nike enjoyed broad sales growth in most markets around the world, including a 5% increase in emerging markets to $902 million.

North American sales increased 9% to $3.14 billion as equipment sales climbed 13%.

Sales in Western Europe, which is slowly recovering from difficult economic times, rose 8% to $1.30 billion, while revenue in Central and Eastern Europe jumped 10% to $366 million.

However, Nike said its sales in Greater China slid 3% to $574 million as footwear sales fell 7%. Sales in Japan inched up just 1% to $158 million.

"We had a great first quarter driven by our unrelenting commitment to delivering innovative products and services to athletes around the world,” Nike CEO Mark Parker said in a statement.

Shares of Beaverton, Oregon-based Nike soared 5.76% to $74.39 in extended trading Thursday evening.

Nike has nearly doubled the broader market’s advance this year, soaring 36.3% through Thursday’s close, compared with 19.10% for the S&P 500.

Leading into the earnings report, Nike has rallied about 10% since the end of August, compared with a 1% dip for the S&P 500.

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