Nike Swoops Ahead in Third Quarter

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It comes as not surprise that Nike (NYSE:NKE) is the world’s largest largest athletic clothing and shoe company.  But it was a surprise when company with the Swoop® logo announced a 55% increase in revenue year-on-year for the third quarter ending 28 February 2013.

© Image copyright achimh

Expectations had been positive for Nike’s third lap in its annual Fiscal Relay, but no one expected such a strong kick.  Nike’s share price had already taken off by 8.2% in pre-market trading this morning, up $4.40 to $58.00 after investors learned the net income had grown to 73¢ per share compared to 61¢ last year

The total net income of $866 million from $560 million in 2011 was helped by a 9% increase in global sales to $6.2 billion along with a 30% increase in gross margin basis points to 44.2%.  The net income was also boosted in part by a 4.9% decrease in the company’s effective tax rate that was the effect of the mix of offshore business as well as the reinstatement of the U.S. research and development tax credit.

President and CEO Mike Parker said that “Our team delivered strong results in Quarter 3.  We did it with a relentless flow of innovation into our key categories. Given the diversity of our portfolio, we’re able to capture big opportunities that drive sustainable, profitable growth.  At the same time we continue to invest in new ways to enhance athletic performance, build strong consumer communities, and improve how we design and manufacture our products.  That’s how we increase our potential and drive shareholder value.”

Equipment sales led the way with a 23% increase during the quarter.  This may be due to securing a major new contract with the NFL.  The Global Brand division was second with an 11% growth, followed by Footwear at 9% and Apparel at 8%.

The North American division contributed 41% of the company’s global revenue with $2.5 billion in sales.  Western Europe followed at with $1.0 billion and Emerging Markets at $839 million.  All three of those divisions reported increases year on year.  Both the Chinese and Japanese division sales fell by 10% and 6% respectively.  Central & Eastern Europe sales were up by 13% from $275 million to $318 million.

Even looking down the track ahead, things look like smooth sailing for Nike.  With an 11% increase in the order book for both North America and Central & Eastern Europe, and a 12% increase for Emerging Markets for March through July, that is more than enough to offset decreases in future orders in hand for Western Europe and Japan and to show an overall 6% increase over 2011.

Nike CFO is expecting a continuing positive trend for the fourth quarter, albeit somewhat more conservative than the results reported today, thus leaving the company’s expectations for the year unchanged.

The keen competition between Nike and Adidas, both of who are having enviable years, can be as exciting as a game of football.  While Nike is dominant in North America, Adidas has the advantage in Europe.  In other markets the two companies run head to head.  These are “fun stocks.”  Everyone should have fun sometime.

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