Nike sprints ahead as high-margin products sales rise

[OREGON] Nike reported a better-than-expected profit for the ninth straight quarter as the world's largest sportswear maker sold more products at higher prices and benefited from increased sales in its owned stores and internet business.

Shares of the company, already up 19 per cent this year, rose 7.5 per cent in extended trading after it also posted a better-than-expected rise in "futures orders" growth.

New footwear launches in the basketball, running, and sports categories are helping Nike draw customers toward higher-priced products and its direct-to-consumer (DTC) channel, while the"athleisure" trend is driving sales of athletic apparel.

The push drove a 90 basis-point increase in gross margins to 47.5 per cent in the first quarter ended Aug 31.

The company has also managed to gain traction among younger customers by leveraging social media and its mobile apps.

Investments in product innovation and gathering feedback and data on customers' fitness activities are also helping Nike get ahead of its rivals, Edward Jones analyst Brian Yarbrough said, calling the first-quarter results "extremely impressive".

The company's orders scheduled for delivery from September through January, a gauge of demand it calls "worldwide futures orders", rose 17 percent, excluding currency changes, at the end of the first quarter.

Analysts on average had expected futures orders growth to slow to 10.3 percent from 13 percent at the end of the fourth quarter, according to Consensus Metrix.

Nike said futures orders grew 27 per cent in China, excluding currency changes, versus analysts' estimates of a 15.8 per cent rise.

Revenue from North America, Nike's largest market, rose 8 per cent. Footwear sales, the largest source of revenue, increased 9 per cent.

The company said net income rose 23 per cent to US$1.18 billion, or US$1.34 per share, in the quarter, higher than the US$1.19 analysts on average had expected.

Revenue rose 5.4 per cent to US$8.41 billion, also beating the average analyst estimate of US$8.22 billion, according to Thomson Reuters I/B/E/S.

REUTERS