Nike Profit Up 8 Percent, Outlook Positive
BOSTON – Nike Inc., the world's largest maker of athletic shoes and clothing, on Thursday said fiscal second-quarter net income rose 8 percent, at the high end of Wall Street estimates, on strong sales in Europe and Asia and a better performance from managers.
Nike also said it still expects modest revenue and earnings per share growth for the year despite a shaky U.S. retail environment. The company's stock rallied in extended after-hours trading, up as high as $55 from its closing level of $53.79.
``The numbers came in stronger than I anticipated,'' said John Shanley, an analyst at Wells Fargo Van Kasper. ``But the key thing is the strength of their forward order levels, worldwide and domestic. It's a good indication (Nike) is likely to have top line growth stronger than what the company has posted over the last couple of the years.''
The Beaverton, Oregon-based maker of Air Jordan sneakers said it earned $129 million, or 48 cents a diluted share, in the second quarter that ended Nov. 30. That compared with $119 million, or 44 cents a diluted share, in the year-ago period.
Wall Street analysts were looking for Nike to earn 42 cents to 49 cents a share, with a consensus estimate of 46 cents a share, according to Thomson Financial/First Call.
Nike's second-quarter revenue rose 6 percent to $2.3 billion, compared with $2.2 billion for the year-ago period.
Nike said U.S. revenue increased 3 percent to $1.2 billion while athletic footwear revenue slipped 2 percent.
In Nike's European region that includes Africa, revenue grew 14 percent to $583 million on surging shoe business. Revenue in the Asia-Pacific region rose 11 percent to $325 million.
Donald Blair, Nike's chief financial officer, told analysts during a conference call that the company remains on track to grow earnings per share for the year while seeing ``middle single-digit'' revenue growth for the balance of the year.
``The retail situation continues to be highly uncertain. So we are fairly cautious over the back half of the year,'' Blair said.
Nike's futures orders, scheduled for delivery between December and April, totaled $3.9 billion. That was 8 percent higher than orders in the year-ago period.
Nike Chairman Phil Knight praised his executive team for improved performance and an early test of new supply chain management software running in the United States.
The better performance comes after executives, including Knight, failed to adjust to a number of problems, including U.S. retail consolidation and the devaluation of currency in Nike's fastest growing market, during the past few years, Knight said.
``Management was good enough not to have a significant decrease in sales during that period, but it wasn't good enough to handle all those problems and create any increase,'' Knight said.
He also said Nike is getting a handle on a more recent problem: the implementation of a complex supply chain management system.
``The supply chain (software) has been much maligned in the past,'' Knight said.
But he said a three-week test of the new supply chain system in the United States, the most complex implementation Nike has had to do, has gone well.
``While we're not ready to declare victory yet, I think the three weeks has gone very well,'' Knight said.
The new system touches all aspects of Nike's operations, including placing orders with manufacturing plants, taking customer orders and paying bills.
In the coming months, Blair said Nike will be able use the system to its fullest capability, which could translate into lower inventory levels and improved profit margins.