Nike Earnings Beat Despite Increasing Competition

By Sruthi RamakrishnanMarketsReuters

Nike Inc, the world's No. 1 footwear maker, reported better-than-expected quarterly revenue and profit, fueled by higher demand across markets such as Western Europe and Greater China and lower costs.

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Sales in North America, its biggest market, rose 3 percent to $3.65 billion in the second quarter ended Nov. 30.

Nike has been facing intensifying competition from rivals such as Under Armour Inc and Adidas AG in North America.

A resurgent Adidas has been chipping away at Nike's dominant position through its popular Yeezy collection designed by rapper Kanye West and its retro sneakers such as the Stan Smith line.

The company's basketball category has come under pressure from Under Armour's NBA-star Stephen Curry's signature shoe line.

Nike's sales in Greater China rose 12 percent to $1.06 billion in the latest quarter. Excluding the impact of currency changes, sales in the region jumped 17 percent.

However, gross margins contracted 140 basis points to 44.2 percent, due to increased product costs, a strong dollar and higher off-price sales.

Nike's net income rose to $842 million, or 50 cents per share, in the three months ended Nov. 30, from $785 million, or 45 cents per share, a year earlier.

Analysts on average had expected earnings of 43 cents per share, according to Thomson Reuters I/B/E/S.

Analysts' average profit estimate had dropped from 52 cents per share in September, according to Thomson Reuters data.

Selling and administrative expenses fell 2 percent to $2.51 billion.

In a break with tradition, Nike said in September it would stop issuing a forecast for its worldwide futures orders, a key indicator of demand, in the earnings release, and would give it during the earnings call.

Revenue rose 6.4 percent to $8.18 billion, beating analysts' average estimate of $8.09 billion.

The company's shares were up 1.7 percent at $52.67 in after-market trading on Tuesday. The stock is the worst performing Dow Jones component this year with a 17 percent drop.

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