Nike (NKE) shares got a lift on Sept. 22 after the sportswear maker reported earnings for the quarter ending in August. Expenses such as stock options slammed its quarterly profit by 13%, but the sportswear company also reported stronger revenue.
The Beaverton, Oregon company said its revenue during the three months ended Aug. 31 rose 9% to $4.2 billion, compared to $3.9 billion for the same period last year. But Nike also took a $40.8 million expense, net of taxes, related to the expensing of stock options. Its selling and administrative costs amounted to 30.8% of first-quarter revenues, compared to 28.6 percent last year.
As a result, Nike's first quarter net income dropped 13% to $377.2 million, compared to $432.3 million in the prior year.
"While making major brand investments to drive key markets and implementing new accounting rules to include stock option expenses, we continued to deliver strong top line growth and laid the foundation for another successful year," said Mark Parker, Nike's president and chief executive officer, in a press release. Nike has had "strong performances" from brands such as Converse Brand Jordan, and Nike Golf, Parker added.
The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from September 2006 through January 2007, totaling $5.2 billion, 6% higher than such orders reported for the same period last year.
Nike's stock surged more than 4% to $85.80 per share on the New York Stock Exchange.
But Parker has not impressed everyone. "Company comments to the contrary, we do see a slowdown in sales of higher-priced footwear at retail," Standard & Poor's equity analyst Mark Basham said in a research note Sept. 22. Basham had estimated that Nike would have $1.50 earnings per share during the quarter, but the company ended up reporting $1.47 EPS, down from $1.61 during the same period last year.
Basham points out that Nike's current quarterly results include a 3-cents EPS benefit from an arbitration ruling related to its Converse business. In constant currency, he thinks Nike's revenue gain is disappointing, with only apparel and the Asia Pacific region providing upside. He maintained a hold opinion on the stock and a 12-month stock price target of $90 per share. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Cos.)