The U.S. multinational corporation Nike (NKE, Financial) surpassed third-quarter earnings and revenue estimates, thanks to robust growth in Latin America and Asia. The footwear maker, however, saw lethargic demand for its sneakers and athletic leisure in the U.S. On a positive note, Nike.com witnessed global sales growth of 18% year over year, on a currency-neutral basis as the company continues to expand its digital apps in international markets.
Diving into the numbers
Nike’s third-quarter earnings per share came in at 68 cents a share, which remained flat when compared with the same period last year. This was, however, the 23rd successive quarter of earnings beat. Quarterly revenue surged 6.5% to $8,984 million, beating estimates comprehensively. Robust revenue was powered by double-digit growth at international locations.
While gross profit jumped 5% to $3,938 million, gross margin plummeted to 43.8%. As a matter of fact, selling and distribution expenses increased 11% year over year to $2,767 million due to rising operating cost and other demand creation expenses. Operating overheads climbed 9% in the third quarter on account of higher administrative expenses in addition to investments in global digital capabilities and the Nike+ membership program.
At the end of third quarter, the footwear maker had cash and short-term investments of $4,751 million while long-term debt, apart from current maturities, was $3,469 million. Shareholders’ equity was $9,782 million. The company bought back shares during the quarter amounting to $962 million for 14.6 million shares.
Guidance
As far as this year is concerned, the company sees a single-digit revenue growth. In addition to this, the company hopes to turn things around in North America. North America’s return to growth would be backed by persistent strength in the international regions. That is the expectation of NIke. As a matter of fact, the company forecasts robust gross margin growth. The company would provide full-year projections in details while reporting fourth-quarter figures.
Last word
The company saw significant gains in China (up 6% year over year), Europe, Middle-East and Africa (up 19% as well as Asia-Pacific and Latin America (up 13%). Growth in these regions easily offset the decline in North America (down 6%). However, the trend of declining sales in the U.S. has taken a U-turn as the company is off to a brilliant fourth- quarter start, thanks to the record consumer response for new React cushioning technology in sneakers.
Disclosure: I do not hold any position in the stock mentioned in this article.
