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E-Commerce, Europe Fuel Nike Growth

The Beaverton, Ore.-based sports footwear and apparel giant saw a 33 percent rise in e-commerce in the second quarter.

Nike Inc. is revving up its digital engine.

This story first appeared in the December 20, 2013 issue of WWD.  Subscribe Today.

In reporting second-quarter earnings that just beat analysts’ consensus estimates, Nike reported 33 percent growth in e-commerce over the comparable period a year ago.

“And, at less than 15 percent of [direct-to-consumer] revenues today, our e-commerce business clearly has an opportunity to grow,” Mark Parker, president and chief executive officer of the Beaverton, Ore.-based sports footwear and apparel giant, told analysts on the company’s conference call late Thursday. “We also expanded our nike.com footprint in the quarter, launching sites in Japan, the world’s third largest e-commerce market, and in Brazil, further extending our commercial reach for consumers in this key growth market.”

Parker noted that Nike’s approach to digital included connections to consumers, such as those to be derived from social media and e-commerce as well as digital products, such as the Nike+ FuelBand SE, introduced in New York in October.

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Trevor Edwards, president of Nike brand, noted that the brand’s 7.5 percent revenue growth in the quarter, to $6.07 billion, was highlighted by a 19 percent advance in DTC revenues, including 10 percent comparable-store growth. On a constant currency basis, revenues rose 9 percent.

Europe and the Converse brand also played big roles in the quarterly performance, as did the first signs of a resurgence in China following a long “reset” of operations and inventories in the world’s most populous nation.

Sales for the Nike brand in Western Europe rose 18.3 percent, to $1.07 billion, while those in Central and Eastern Europe were up 17.1 percent, to $295 million. Converse also turned in a double-digit growth rate, moving up 13.9 percent to $360 million in revenues.

The strong performance in Europe drew some of the attention away from a less than stellar performance in North America, where brand sales were up 9.2 percent to $2.8 billion, slightly below the growth rate of 10 percent or more expected by many analysts.

In the three months ended Nov. 30, net income rose 39.8 percent to $537 million, or 59 cents a diluted share, 1 cent better than the 58-cent consensus estimate. Year-ago profits were $384 million, or 42 cents a share. Year-ago numbers include discontinued operations.

Revenues overall grew 8 percent to $6.43 billion, slightly below the $6.44 billion expected by Wall Street, from $5.96 billion a year ago. Excluding the effects of currency fluctuation, revenues rose 9 percent. Gross margin rose 140 basis points to 43.9 percent of sales.

The closely watched tabulation of futures orders — those scheduled for delivery through April 2014 — was up 12 percent to $10.4 billion and ahead 13 percent on a currency neutral basis.

Included in that tabulation were not only increases of 26 and 13 percent, respectively, for Western Europe and Central/Eastern Europe, but also a 4 percent increase for China, or 1 percent excluding expected currency impact. That followed an 8.1 percent increase in revenues in Greater China for the second quarter, to $629 million.

Edwards reiterated that the path to sustained, profitable growth in China won’t be “linear” but added that the company is seeing the first signs of success as it differentiates its product offering along sports classifications.