By  on December 22, 2010

A better than 20 percent increase in its U.S. apparel business helped Nike Inc. grow second-quarter profits beyond analysts’ expectations.

For the three months ended Nov. 30, the Beaverton, Ore.-based athletic footwear and apparel powerhouse posted net income of $457 million, or 94 cents a diluted share, 21.9 percent above the $375 million, or 76 cents, registered in last year’s quarter. Analysts on average had expected EPS of 88 cents, according to Yahoo Finance.

Revenues grew 9.9 percent to $4.84 billion from $4.41 billion.

“For the Nike brand, revenue grew 10 percent in constant currency with increases in every category, except sportswear, and every geography, except Japan,” Don Blair, vice president and chief financial officer, said on a conference call.

Nike brand apparel sales rose 8.4 percent to $1.38 billion, from $1.28 billion, led by 22 percent growth in North America, where apparel sales reached $538 million. Nike footwear sales overall rose 11.1 percent to $2.58 billion.

Mark Parker, president and chief executive officer, told analysts on the call that the Converse brand had reached $1 billion in volume for the 12 months through November.

The company said future orders for Nike apparel and footwear, covering merchandise due for delivery through April, were up 11 percent, to $7.7 billion, with the biggest boosts coming from Greater China (up 18 percent), North America (up 16 percent) and emerging markets (up 15 percent). The level is flat in Western Europe and down 2 percent in Japan. Inventories were up 7.9 percent to $2.35 billion.

Gross margin expanded 80 basis points to 45.3 percent of sales as full-price sales increased their share of overall revenues and close-outs were both less frequent and more profitable.

Blair said same-store sales in Nike’s retail outlets were up 13 percent in the quarter and online sales rose at exactly twice that rate.

He warned of “strong gross margin headwinds for the next few quarters,” in the form of higher material and transportation costs and uncertainty in currency markets, but expressed confidence that Nike’s operations were well-positioned to meet the challenge.

For the six months, net income rose 11.9 percent to $1.02 billion, or $2.08 a diluted share, as revenues picked up 8.8 percent to $10.02 billion.

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