7/29/2014

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Business

Nike 3rd quarter net income jumps

BEAVERTON, Ore. (AP) — Nike Inc. said Thursday its third-quarter net income rose 55 percent as the athletic gear maker's resurgence in North America and easing material costs helped offset continued weakness in China.

The world's largest athletic shoe and clothing company's results beat expectations and its shares jumped 8 percent in aftermarket trading.

Like most global companies, Nike Inc. has been dealing with Europe's fluctuating economy and a slowdown in growth in China. Nike has been working to reduce its inventory in China and reworking its offerings there to adapt to the changing tastes of Chinese consumers. It also has been focusing on growth in North America, selling off less profitable brands like Umbro to focus on core brands like Nike.

The company's quarterly results show Nike's strategy is paying off in North America, but it's still facing weakness in China. North American revenue, which accounts for 40 percent of revenue, rose 18 percent to $2.55 billion. Revenue in China, which accounts for 10 percent of revenue, was down 9 percent to $635 million.

"The U.S. business continues to be just phenomenal," said Morningstar analyst Paul Swinand. But he added that "for real long-term growth to be solid, it has got to come from China and emerging markets."

In a call with analysts, CEO Mark Parker said the company was seeing progress in China, but "we still have more to do before we can capture its long-term growth potential."

Net income for the three months ended Feb. 28 rose to $866 million, or 73 cents per share. That compares with $560 million, or 61 cents per share, last year. Analysts expected 67 cents per share, according to FactSet.

Higher labor costs were more than offset by raising prices and easing material costs, the company said.

Revenue rose 9 percent to $6.19 billion, from $5.66 billion last year, nearly matching analysts' expectations of revenue of $6.2 billion.

Nike brand revenue rose 10 percent excluding currency fluctuations, growing everywhere but China and Japan. Growth from other brands including Converse, Nike Gold and Hurley rose 9 percent.

Looking forward, orders for Nike shoes and apparel to be delivered between May and July rose 6 percent to $9.9 billion. That includes an 11 percent increase in North America, a 5 percent decline in Western Europe and a 4 percent increase in China.

Parker said e-commerce is a focus for the future. Online revenue rose 33 percent in the quarter, but Parker said he would like to grow that business more and the company will improve the online shopping experience.

"It's a pretty big gap between where e-commerce is today and where we can take it," he said.
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