The U.S. Soccer team at the FIFA World Cup wasn’t the only American group to advance Thursday.
Nike Inc. scored a victory with investors, beating fourth-quarter earnings and revenue expectations, improving its gross margin and delivering a better future orders number than most analysts expected.
The numbers for the final quarter of Nike’s fiscal year were a strong response to analysts who’d expressed concern that the company’s advertising and promotional spend for the World Cup might cut into its earnings. Although “demand creation expense” grew 36.4 percent in the quarter to $2.75 billion, the effects on the bottom line were blunted by the increase in gross margin, to 45.6 percent of sales from 43.9 percent a year ago, as higher average selling prices and migration of sales to the direct-to-consumer channel offset higher input costs and unfavorable currency exchange.
On a currency-neutral basis, soccer posted the largest gain of any of the categories in the Nike brand family during the year, growing 21 percent to $2.27 billion and boosting its share of the brand’s sales to 9.5 percent from 8.8 percent in 2013.
“That doesn’t even include our football sportswear product,” said Trevor Edwards, president of Nike brand, on a conference call with analysts late Thursday.
Shares of the Beaverton, Ore.-based sports gear giant rose 3 percent to $79.15 in after-hours trading following the disclosure of the earnings results after gaining 0.5 percent to $76.86 during the day’s regular trading session.
Coming just hours after the U.S. fell to Germany 1-0 in World Cup competition while still advancing to the next round, Nike took a slightly less aggressive tone than its German rival Adidas. On Tuesday, Herbert Hainer, Adidas chief executive officer, said that the firm would “definitely achieve” its goal of 2 billion euros, or $2.75 billion at current exchange, in sales in the soccer category for the year. Adidas is the official sponsor, supplier and licensee of the 2014 FIFA World Cup, supplier of the official match ball and is outfitting nine teams and about 300 players in the competition.
Nike is outfitting 10 teams and boasted about its products more than it did direct-sales results. Edwards noted, “There are more players wearing Nike boots in the World Cup than all other brands combined. And more than a third of them are playing in the distinctive and revolutionary Magista or Mercurial Flyknit boots.”
He added that Nike is “seeing great excitement at retail” and that interest in soccer, or football as it’s known throughout most of the world, “has helped to drive great results in our stores, online and in our football shops with our wholesale partners around the world.”
In the three months ended May 31, net income was up 5.4 percent to $698 million, or 78 cents a diluted share, above the 74-cent earnings per share expected. Year-ago profits were $662 million, or 73 cents. Revenues spiked 10.9 percent to $7.43 billion from $6.7 billion, with Nike brand revenues up 10.8 percent to $7.02 billion and Converse up 15.8 percent to $410 million. Futures orders were up 11 percent, 12 percent on a currency-neutral basis, while inventories rose 13.3 percent to $3.95 billion.
Nike brand footwear revenues rose 12 percent to $4.4 billion, and apparel increased only slightly less, growing 11.8 percent to $2.14 billion.
For the full year, net income was up 8.9 percent to $2.69 billion, or $2.97 a diluted share, as revenues expanded 9.8 percent to $27.8 billion and gross margin hit 44.8 percent of sales from 43.6 percent in 2013.
Direct-to-consumer sales for the Nike brand were up 27 percent in the quarter and 22 percent for the 12 months, surpassing the $5 billion mark in the year just concluded. Online sales were up more than 40 percent during the year, and the growth rate accelerated in every quarter of the year.
On the conference call, Mark Parker, president and ceo, said Nike is “building an integrated system of digital services that will provide seamless access to our products, a full array of services and the most advanced digital tools to measure, motivate and inspire.”
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