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Nike profit rises, North American orders jump

Nike shoes are displayed at a Niketown store in Beverly Hills, California, March 16, 2010. REUTERS/Lucy Nicholson
Nike shoes are displayed at a Niketown store in Beverly Hills, California, March 16, 2010. REUTERS/Lucy Nicholson

By Phil Wahba

(Reuters) - Nike Inc on Thursday posted a higher quarterly profit and said advance orders for its clothes and shoes had jumped, particularly in North America.

Shares were up 3.2 percent to $64.30 in after-hours trading.

Orders for Nike-branded shoes and clothing scheduled for delivery between June and November 2013, a gauge of demand Nike calls "futures orders," rose 8 percent globally.

Those orders were up 12 percent in North America, by far Nike's biggest market, assuaging concerns on Wall Street that it could not keep up the pace of growth of recent quarters.

"There had been a lot of concern that North America would slow, but that hasn't happened. North America continues to show unbelievable growth," Edward Jones analyst Brian Yarbrough told Reuters.

But in China, stripping out the effect of currency fluctuations, they were flat, a disappointment after rising last quarter, when investors thought Nike's business was improving there at last. China accounts for about 11 percent of the Nike brand's sales, but 22 percent of its profit.

In China, Nike has grappled with excess inventory and intense competition from rivals cutting prices, pinching its business, and the company is trying to improve its business there.

"The reset requires discipline and patience. The race in China is a marathon, it's not a sprint," Nike Chief Executive Mark Parker told investors.

Excluding the impact of currency fluctuations, revenues were flat in Western Europe and up in Eastern Europe and Japan. In China, sales fell 1 percent.

Sales of basketball gear and running gear rose the most among Nike's product categories.

For the quarter ended May 31, the company earned $668 million, or 76 cents a share, compared with $549 million, or 60 cents a share last year. That was 2 cents better than Wall Street analysts expected, according to Thomson Reuters I/B/E/S.

Nike's gross profit margin rose 1.1 percentage points to 43.9 percent of sales, jumping for the second quarter in a row after two years of declines. The company was helped by earlier price increases and lower cotton costs.

Total revenue rose 7.4 percent to $6.7 billion, slightly above expectations.

(Reporting by Phil Wahba in New York; Editing by Phil Berlowitz and Eric Beech)

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