Nike Inc. (NKE, Financial) reported first-quarter financial results on Sept. 25 that surpassed analyst expectations.
By the numbers
The company’s earnings were 67 cents per share. Revenue was $9.95 billion, up 10% on a year-over-year basis.
Selling and administrative expenses amounted to $3.1 billion, up 7% from the year-ago quarter. This included “demand creation” expense of $964 million due to sports marketing investments, brand campaigns and key sports moments. The company’s gross margin surged to 44.2% thanks to an increase in the average selling price, positive full-price sales mix and margin growth in Nike Direct, which was only partially offset by the rising product costs.
Sales soared 11% for apparel and 10% for footwear.
Segment details
In the North American market, the athletic apparel and footwear giant saw revenue growth of 6% to $4.15 billion. The company attributed the positive perfomarnce to new product launches and better inventory management.Ă‚
Sales rose a combined 9% to $2.61 billion (excluding currency changes) in the Europe, Middle East and Africa segment. Sales in greater China, excluding currency changes, jumped 20% and spike 14% in the Asia-Pacific and Latin America segment.
In a statement, Chief Financial Officer Andrew Campion lauded the company's performance.
"We are delivering stronger global growth and profitability than we anticipated entering this fiscal year," he said.
Focus on customer connections
Nike is focusing on providing more personalized service to customers through consumer-direct initiatives. For instance, the company's 2X Direct initiative focuses on establishing direct connections with customers through mobile devices. Nike's campaign was successful in this first quarter as it posted 36% digital growth in the quarter, which was led by mobile.Ă‚
"Digital was once again our fastest-growing channel in each and every geography," Campion said. "The company's been pouring money into new technology and is seeing some traction with its Nike mobile app as well as 'explosive growth' in its SNKRS app… It plans to invest more in consumer data and analytics as well as digital product design and production next year”
While digital sales are an important part of Nike’s business, the company firmly believes its brick-and-mortar operations can also help further its efforts to better serve consumers. One way is through the Nike App, where customers can easily browse and reserve products that are available at the nearest Nike store. Further, the company has also developed a triple-double strategy to power its customer-direct offense, which consists of "2X Innovation, 2X Speed and 2X Direct connections with consumers."
Disclosure: I do not hold any positions in the stocks mentioned in this article.
