Bloomberg News

Nike Profit Tops Estimates as U.S. Sales Gain; Shares Climb

June 27, 2011

(Updates with analyst’s comment in fourth paragraph.)

June 27 (Bloomberg) -- Nike Inc., the world’s largest sporting-goods company, reported fourth-quarter profit that topped analysts’ estimates as sales climbed in North America. The shares surged.

Net income rose 14 percent to $594 million, or $1.24 a share, in the quarter ended May 31, from about $522 million, or $1.06, a year earlier, Beaverton, Oregon-based Nike said today in a statement. Analysts projected $1.17 a share, the average of 15 estimates compiled by Bloomberg.

Chief Executive Officer Mark Parker has boosted sales and reduced marketing costs from a year earlier, when Nike promoted around the World Cup, to fight rising costs for cotton, labor and transportation that have reduced profitability in the apparel industry this year.

“Demand for the brand is strong,” said Matt Arnold, an analyst at Edward Jones & Co. in Des Peres, Missouri, who recommends buying Nike shares. “When you are operating from a position of strength, it’s easier to overcome that.”

Nike rose $3.65, or 4.5 percent, to $85.27 at 5:16 p.m., after the close of regular New York Stock Exchange composite trading. The shares had dropped 4.4 percent through regular trading today.

Nike Brand Orders

Orders for the Nike brand from June to November increased 12 percent, excluding currency fluctuations. That topped the average estimate of five analysts for a gain of 9.4 percent.

Total revenue rose 14 percent to $5.77 billion. Analysts projected $5.54 billion, the average of 13 estimates. Sales in North America, Nike’s largest market, advanced 22 percent to $2.1 billion, led by the running category.

Increased costs narrowed Nike’s gross margin, the difference between sales and cost of goods, by 3.1 percentage points in the quarter.

In March, Nike projected fourth-quarter gross margin would contract by at least 3 percentage points. The company said at the time it would start raising some prices and that such increases would become widespread in 2012.

Nike’s gross margin shrank 1.1 percent in third quarter as net income missed analysts’ estimates for the first time in 19 quarters and the stock sank the most in two years.

(Nike will hold an analyst meeting at 1 p.m. New York time tomorrow. To listen, visit NKE US <EQUITY> EVT <GO>.)

--Editors: Kevin Orland, James Callan.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.


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