Shares of Nike Inc. sped to an all-time high late Thursday after the sports footwear and apparel powerhouse reported double-digit increases in first-quarter results that surpassed even the most optimistic estimates of analysts.
In early after-hours trading, shares rose 6.3 percent to $84.80, eclipsing the previous high of $82.79 set on Sept. 8. Earlier in the day, they’d suffered along with those of most U.S. equities, declining 1.4 percent to close at $79.75.
While the Nike brand’s footwear sales were the star attraction of the first-quarter numbers, rising 18.1 percent to $4.7 billion, its apparel shared the spotlight, with sales up 10.6 percent to $2.24 billion. Converse also enjoyed a strong quarter as sales rose 16.4 percent to $575 million and operating profit was up 10.1 percent to $186 million.
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The closely watched futures orders barometer, measuring bookings for Nike brand merchandise between this month and January, rose 11 percent, 14 percent on a constant currency basis, and was up in all regions except Japan, where it was down 5 percent overall and flat in constant currency.
Nike said it registered “growth in every product type, geography and key category, except Action Sports and Golf.”
In the three months ended Aug. 31, net income grew 23.5 percent to $962 million, or $1.09 a diluted share, from $779 million, or 86 cents, in the first quarter of last year. The earnings per share figure exceeded the analysts’ consensus estimate of 88 cents by 21 cents, nearly a 25 percent “outperform.”
Sales also exceeded expectations, expanding 14.5 percent to $7.98 billion from $6.97 billion and against a consensus estimate of $7.83 billion. Gross margin strengthened to 46.6 percent of revenues from 44.9 percent a year ago. On a late-afternoon conference call to discuss the results, Don Blair, chief financial officer, attributed the better-than-expected margin figure to “a more significant mix shift to higher-margin products and geographies, as well as strong revenue growth in our [direct-to-consumer] business.” DTC operations generally carry higher margins than those dedicated to wholesale, but have also commanded high investments for those brands entering or expanding them.
Heralding the importance of innovation to the company’s performance, Mark Parker, president and chief executive officer, made frequent mention on the call of the success of Nike’s lightweight, seamless Flyknit footwear. He also pointed out the importance of new products in the company’s apparel business, including the Dri-Fit rain jacket, the Nike Pro collection and “the further extension of our Dri-Fit knit in collections like Nike tech fleece.”
After several quarters of fine-tuning, Nike’s business in China performed well, with revenues ahead 18.3 percent to $679 million, including a 2.5 percent increase in the market’s apparel business to $202 million, and operating income ahead 28.2 percent to $218 million. Blair said increases were likely to be stronger in the first half of the new year, fiscal 2015, than in the back half because of more difficult comparisons ahead.