Nike Sees Jump in Sales, Growth Concerns -- 2nd Update

By Tess Stynes 

Nike Inc. said its sales surged 15% for the quarter ended November, exceeding expectations, but shares of the athletic apparel maker slid amid concerns about future growth.

Nike's future orders, an indicator of coming growth, rose 7% in the latest quarter, or 11% excluding currency fluctuations. The future orders are for Nike-branded footwear and apparel deliveries set for December through April. The rates represent a decrease from the August quarter, when its futures orders were up 11%, or 14% excluding currency changes.

Future orders don't necessarily reflect actual revenue growth, but the metric is closely followed by analysts.

Shares fell 2.5% to $94.65 in recent after-hours trading. The stock has risen 24% over the past year through Thursday's close and hit an all-time high of $99.76 on Nov. 28.

Chief Executive Mark Parker had commented in September that Nike could benefit from the popularity of athletically styled footwear and clothes with consumers that aren't necessarily planning a workout. Such athletic styles have been crossing over to casual wear and even workplace attire--a fashion trend some call "athleisure."

For the three months ended Nov. 30, Nike's overall sales reached $7.38 billion, while analysts polled by Thomson Reuters recently expected $7.15 billion. Nike brand sales increased 15% to $7 billion, on broad growth across its products and geographic markets.

Nike still derives the majority of its income from North America and footwear. However, more than half of its sales are further afield, where economic and foreign-exchange pressures could hurt the company's revenue and margins.

In North America, where Nike dominates the market, Nike brand sales grew 16%. In key markets with potential for growth such as Western Europe, home of Nike's chief rival Adidas AG, Nike brand sales climbed 22%. In Greater China, Nike brand sales climbed 21%.

Nike's future orders, an indicator of coming growth, rose 7% in the latest quarter, or 11% excluding currency fluctuations. The future orders are for Nike-branded footwear and apparel deliveries set for December through April, but don't necessarily reflect actual revenue growth. Still, the metric is closely followed by analysts.

Excluding currency fluctuation, future orders increased 13% each in its North America, Western Europe and China segments.

For the period ended Nov. 30, Nike reported a profit of $655 million, or 74 cents a share, up from $534 million, or 59 cents a share, a year earlier. Analysts expected per-share profit of 70 cents.

Gross margin rose to 45.1% from 43.9%, mostly owing to an increase in the portion of higher-margin products.

Nike has used expensive sponsorships to increase its market share in sports such as soccer and basketball. In the latest period, such costs boosted spending for what Nike calls "demand creation" increased 11% to $766 million.

Write to Tess Stynes at [e-mail]

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