Runners push Nike profit higher in first quarter

Nike’s first quarter profit topped analysts’ expectations after demand for running and basketball shoes helped North American sales.

Net income in the quarter ended August 31st rose 38 per cent to $780 million from $567 million a year earlier, the company said in a statement. Earnings per share from continuing operations were 86 cents. beating the average of estimates compiled by Bloomberg of 78 cents.

Chief executive Mark Parker has been introducing products, including updates to the Flyknit line of shoes, to capture a greater share of the market for running gear. Flyknit shoes, which feature upper portions woven from a single thread, sell for $150 or more, helping Nike maintain profitability in the face of higher labour costs.

“A number of things are firing on all cylinders,” Paul Swinand, a Morningstar analyst in Chicago, said.“Almost everything across the board is strong.”

Nike rose 6.3 per cent to $74.80 in extended trading yesterday after the close in New York. The shares had gained 36 per cent this year through the close, compared with a 19 per cent increase for the Standard and Poor’s 500 Index.

Sales rose 7.7 per cent to $6.97 billion, topping analysts’ $6.96 billion average estimate. Sales in North America, Nike’s largest market, rose 9.4 per cent to $3.14 billion.

Orders for the Nike brand from September to January, excluding the effects of currency exchange-rate fluctuations, rose 10 per cent. The average estimate of six analysts was a 7.7 per cent gain. Nike’s gross margin, the percentage of sales left after subtracting the cost of goods sold, widened to 44.9 per cent from 43.7 per cent, on falling prices for raw materials and less discounting. Analysts estimated 43.8 per cent, on average.

The increase was the third straight after nine consecutive declines caused mostly by rising labour costs. In China, which had been one of Nike’s fastest-growing markets, sales excluding currency fluctuations fell 3 per cent to $574 million for a fourth straight decline. Orders in China on that basis rose 2 per cent, compared with analysts projecting a gain of 0.5 per cent.

“I’m not sure if the problems in China are behind them,” Mr Swinand said. “It’s not getting worse.” (Bloomberg)