Nike Inc. sprinted ahead in the first quarter, pushing profits up 15.4 percent even as margins were pressured by higher product costs and more off-price sales than a year earlier.
And even though the consumer everywhere is under pressure, Mark Parker, president and chief executive officer, said the growing middle class in developing nations is ready to spend when the price is right.
Net income during the quarter rose to $645 million, or $1.36 a diluted share, from $559 million, or $1.14, a year earlier. The bottom line came in 15 cents better than Wall Street anticipated, helping to push the stock up 5.4 percent to $88.71 in after-hours trading.
Revenues for the quarter ended Aug. 31 increased 17.5 percent to $6.08 billion from $5.18 billion a year earlier and were well ahead of the $5.75 billion projected by analysts. Apparel sales gained in each of the athletic giant’s two biggest markets, rising 22.7 percent to $632 million in North America and 10.3 percent to $407 million in Western Europe.
The Beaverton, Ore.-based firm’s gross margins fell to 44.3 percent of revenues from 47 percent, though selling and administrative expenses grew at a slower rate than revenues, perking up just 9 percent.
Parker told analysts on a conference call that the company faced headwinds from higher costs for labor, materials and freight and that gross margins would continue to lag this quarter.
But Nike has had more luck than most in offsetting those cost pressures and Parker underlined the importance of the company’s diverse portfolio — which includes the Nike, Cole Haan, Converse, Hurley and Umbro brands and is not reliant on any one region, price point or demographic.
“The economic uncertainty that we’re seeing today is putting pressure on consumers around the world,” the ceo said. “Yet in most countries, we continue to see solid growth in footwear and apparel sales, which tells me the growing middle class [in the] developing markets is increasing consumption and that consumers everywhere are ready to buy when they feel good about what they get for their money.”
Orders scheduled for delivery through January — a closely watched gauge of the health of Nike’s business — rose 16 percent from a year ago to $8.5 billion. Excluding currency changes, future orders rose 13 percent.