Nike Sales Surge, Boosted by China, Higher Prices -- 2nd Update

By Tess Stynes 

Nike Inc.'s sales rose a better-than-expected 5%, boosted in part by higher average selling prices and strength in its China business.

Shares of the Beaverton, Ore.-based company rose 7.4% to $123.23 in recent after-hours trading as per-share earnings and revenue surpassed expectations. Through the close Thursday, the stock had risen 42% over the past 12 months.

The world's top seller of sports and footwear has had a giant lead in the sports apparel sector, where in addition to competition from Germany-based rival Adidas AG, younger rivals such as Under Armour Inc. and Skechers USA Inc. have been moving in on its turf.

Nike has benefited from cultural trends that favor its products, including the rise of athletically styled footwear and clothes among consumers that aren't necessarily planning a workout.

World-wide orders of Nike apparel and footwear for delivery from September 2015 through January 2016 improved 9% from a year earlier, including currency changes. That was below the 11% increase Nike reported for the year-earlier period but higher than the 2% growth from the last quarter.

Excluding currency fluctuations, future orders rose 17% from the year-earlier period, above the 13% growth in the last quarter.

The future orders don't necessarily reflect actual revenue growth, but the metric is closely followed by analysts looking for insight into global demand for Nike's products.

For the three months ended Aug. 31, revenue increased to $8.41 billion from $7.98 billion. Analysts polled by Thomson Reuters had projected revenue growth of 3% to $8.22 billion.

Nike reported a profit of $1.18 billion, or $1.34 a share, up from $962 million, or $1.09 a share, a year earlier. Analysts polled by Thomson Reuters had expected per-share profit of $1.19.

Gross margin rose to 47.5% from 46.6%. The company credited the increase to higher average selling prices and continued growth in the more profitable direct-to-consumer business.

Overall, Nike brand sales grew 6.4% to $7.9 billion, a rise of 15% if currency impacts are excluded. In North America, where Nike dominates the market, Nike brand sales grew 9% excluding currency impacts.

Elsewhere, excluding currency impacts, Nike brand sales rose 14% in Western Europe, 26% in Central Europe and 30% in Greater China.

Nike has used expensive sponsorships to increase its market share in sports such as soccer and basketball. In the latest period, Nike reduced such spending--called demand creation--by 7.2% to $832 million. The decrease reflected increased spending in the year-earlier period related to the 2014 World Cup.

The company's effective tax rate in the latest quarter was 18.4%, compared with 21.7% a year earlier, on an increase in the portion of its earnings from operations outside the U.S.

Write to Tess Stynes at [e-mail]

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(END) Dow Jones Newswires

September 24, 2015 17:06 ET (21:06 GMT)

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