Nike (NKE, Financial), based near Beaverton, Oregon, posted strong third quarter results. The company is well-positioned to continue to deliver long-term growth that is both sustainable and profitable. Its powerful global portfolio of businesses, combined with strong financial discipline, continue to drive significant shareholder value. Strong consumer demand drove revenue growth across the portfolio.
Nike’s product pipeline is full of incredible innovations. It is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. It is one of the leading athletic apparel and footwear enterprises and has its presence in approximately 190 countries around the world.
The footwear industry is booming right now, and this company has more room to grow. It is one of the most valuable and well-reputed brands in the world. Nike is relentlessly focused on striving toward its full potential by delivering break-through innovation in products and services, by reaching new levels of sustainability, enhancing product performance and by presenting products in compelling experiences at retail.
Strong third quarter
Revenues during the third quarter increased by 8% and was $8 billion. Revenues for the Nike brand were $7.6 billion.
Gross margin during the quarter was 45.9%, which was flat as compared to the prior year quarter)
Selling and administrative expenses increased by 8% and was $2.6 billion. Net other income was $17 million. Net income increased by 20% and was $950 million during the third quarter.
Share repurchases
During the third quarter, Nike repurchased a total of 24.3 million shares for approximately $1.5 billion and concluded the company’s previous four-year, $8 billion share repurchase program approved by the board of directors in September 2012. Under this program, the company purchased a total of 197.1 million shares at an average price of approximately $40.58.
Following the completion of the previous program, the company began repurchases under the four-year, $12 billion program approved in November 2015. Of the total shares repurchased during the third quarter, 11.1 million shares were purchased under this program for approximately $649 million at an average price of $58.66.
Future orders
As of the end of the quarter, worldwide futures orders for athletic footwear and apparel scheduled for delivery from March 2016 through July 2016 were 12% higher than orders reported for the same period last year.
Focus on women’s business
Nike is currently focusing on expanding its women’s business segment. Amy Montagne, who has been appointed vice president and general manager of Nike Women’s, will be responsible for expanding Nike’s brand position with women and continuing to drive the current momentum within Nike’s women’s business.
“With such an explosion of creativity in sport and a growing lifestyle that seamlessly integrates her run and workout with the rest of her day, Nike has never been better positioned for growth,” said Montagne.
Nike expects its women’s business revenue to grow up to $7 billion by 2017. The company garners about $5 billion annually from its female customers. Nike hopes to push its sales up by 40% in the coming five years.
Nike has already started rolling out women’s stores, like the one opened in Newport Beach, California. This store has its personal styling and fitting amenities. “The Nike brand is expected to deliver nearly $10 billion in incremental revenue by Fiscal 2017, and our apparel, women’s and ecommerce businesses will support this growth,” said Trevor Edwards, president of Nike Brand. “Over the last three years, the Nike brand has grown close to 40%, and we will continue to innovate and grow by focusing on products and services that capture the imagination of our consumer and help athletes perform at their highest potential.”
Positive attributes
The company has the following positive attributes attached to it:
- Solid pricing power.
- Continual innovation.
- Investment in research and development.
- It has a robust pipeline.
- It is constantly evolving.
On a concluding note
Today, Nike continues to seek new and innovative ways to develop superior athletic products and creative methods to communicate directly with its consumers. Nike is a hit among the brand-conscious consumers and customers who don’t mind paying extra for this brand. It definitely lives up to its slogan, “Just Do It.” Nike’s tremendous financial performance will help the company stay a step ahead of its competitors.
It has already witnessed tremendous success in North America. Asia holds tremendous opportunities for this company. With robust innovation, continuing research and development activities, Nike is bound to create shareholder returns.
The inclination towards stylish and comfortable clothing, rise in disposable levels of income and a sudden increase in fitness-conscious people will boost the company’s growing popularity. The next few years may see the company shifting its focus toward other stylish accessories like sunglasses. Innovation has always played a key role in Nike’s success.
Working out will never go out of fashion, and women play an integral part in fashion trends. Nike has tremendous growth potential in the women’s business segment.
Disclosure: I do not hold any position in the company.
