The athletic footwear retailer, Nike (NKE, Financial), is one of the leading players in the footwear industry. Its shares have risen by 40% in the last one year. With its innovative efforts, it has been able to register higher sales for quite some time. Thus, Nike was able to post another great quarter, which included the holiday season. Its third quarter numbers were ahead of the Street’s estimates, helping its shares move north.
A snapshot of the numbers
Revenue for the quarter surged 7% to $7.46 billion, as compared to the previous year. The top line was driven by a strong demand in North America and other key markets of the company. However, it failed to meet the analysts’ estimate of $7.62 billion mainly because of unfavorable currency fluctuations. A stronger dollar affected the sales of the company. Excluding the currency effect, sales would have been 13% higher, helped by growth across all the segments and geographies.
Some of the key regions which performed well were North America, Western Europe and China. North America grew 6% growth during the quarter owing to growth in men’s training, basketball and sportswear. Also, double digit growth in China by 17% and Western Europe of 10% was also instrumental in its growth during the holiday season.
But, currency fluctuations in the third quarter affected revenue from Eastern Europe and Japan. Revenue from Japan dropped 6% over last year and would have jumped 8%, if the dollar wasn’t so strong. Sales in the Emerging markets were up by 12%.
The Nike Brand DTC was up by 29% and was primarily helped by strong same store sales, new store openings and online sales at nike.com. Demand for athletic products has been on the rise because of the “athleisure” trend, which has made athletic wear very popular. It is now not restricted to gyms only, but is also used for daily clothing.
The gross margin of the company expanded 140 basis points to 44.5%, due to the rising demand for higher margin products. Also, the bottom line jumped 16% higher, clocking in at $0.89 per share, better than the analysts’ estimate of $0.84 per share.
Significant measures undertaken
The footwear retailer is looking out for new products. It does not want to be restricted to footwear only, but plans to expand into products such as women’s tights and other apparels, which is expected to add $2 billion by 2017.
One of the strongest segments of Nike is footwear, where sales increased 15% and apparel which grew 8% during the quarter. However, smaller equipment sales, such as baseball gloves and golf clubs, dropped 1%.
The Future orders of the retailer jumped 11% as against the estimate of 9.9% for Nike branded products. The orders are to be sold between March and July. China is showing tremendous growth and is the largest market for athletic footwear and apparel. The retailer’s efforts in this market have been quite interesting resulting in higher demand.
Winding it up
Nike is the largest player in the athletic footwear industry. Its great strategic efforts, such as launching new products, bringing in technological advancements and higher marketing efforts, have been instrumental to its growth. Its numbers have been impressive and the future orders indicate growth. Furthermore, it repurchased 6.5 million shares during the quarter. Thus, this athletic retailer deserves your attention.
