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Nike 3rd-quarter net up 32 percent
2008-03-19
Nike Inc (NKE.N) posted a 32 percent rise in quarterly net profit on Wednesday, well above expectations, on strong international demand, especially in China, sending shares up 5 percent. The world's largest maker of athletic footwear and apparel said a weak dollar contributed to a 16 percent gain in third-quarter sales, while fatter margins and lower costs boosted profit. "The real telling factor was the strong gain in Asia. That really knocks the cover off the ball," said Susquehanna Financial analyst John Shanley. Besides a 27 percent sales gain in Asia Pacific, Shanley also cited a 23 percent jump in Europe and a 20 percent advance in the Americas. In the quarter, sales in China rose 50 percent on a currency-neutral basis. Nike has already reached $1 billion in sales in China, a year ahead of its original target, its chief executive said on a conference call. Third-quarter net profit rose to $463.8 million, or 92 cents per share, from $350.8 million, or 68 cents per share, a year earlier. Total sales jumped to $4.54 billion from $3.9 billion. Wall Street, on average, had been expecting earnings of 80 cents per share on revenue of $4.36 billion, according to Reuters Estimates. Gross margins rose to 45.1 percent of sales from 44.2 percent, while costs fell to 30.9 percent of sales from 31.7 percent. The company also benefited by a slightly lower tax rate. Global orders for delivery of shoes and apparel from now until July rose 11 percent, Nike said. Goldman Sachs was looking for an increase of 10.5 percent. While futures orders abroad saw the healthiest growth, they rose a mere 1 percent rise in the United States. Shanley expected U.S. orders to be flat or be slightly down: "It's not a huge positive, but at least they didn't report a negative," he said. Nike has seen rapid growth in emerging markets for its footwear as it gets ready for the Beijing Olympics. Robust demand for its smaller, non-Nike brands boosted sales 15 percent in the quarter. In the U.S., it has been controlling inventory as athletic shoe retailers struggle to woo cash-strapped consumers. The weak dollar boosted revenue growth by 13 percentage points in its European region, 7 points in Asia and 10 points in the Americas. Nike recently completed the acquisition of British soccer brand Umbro, which it hopes will beef up its soccer division. It is also selling its Bauer Hockey division to an investor group and unloaded its Starter apparel brand to apparel company Iconix Brand Group Inc (ICON.O) in December. Nike shares trade at 15 times fiscal 2009 earnings at a premium to its largest competitor, German brand Adidas (ADSG.DE), which trades at over 10 times for the same period. In after-hours action, shares rose to $65.03 from a close of $61.83 on the New York Stock Exchange. Shares are up 14 percent over a year ago. (Reporting by Alexandria Sage; editing by Jeffrey Benkoe)
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