CARLO ALLEGRI/Reuters
Nike Inc’s quarterly revenue and profit beat Wall Street expectations on Tuesday as a push to sell sneakers and apparels to consumers through its own stores and online retailers gained pace, boosting margins and sending its shares up 6 per cent.
Wall Street has been bullish about Nike ever since the world’s largest footwear maker unveiled “Nike Direct,” a strategy that includes focus on online sales, product launches and supply chain improvements to bring new products to shelves faster.
It has also launched pop-up stores that cater to “sneakerheads” or loyal fans of the brand in several big U.S. cities in an effort to build a strong relationship with its customers and gain market share.
Revenue from China, its fastest growing market where it opened a flagship store earlier this year, rose 22 per cent to $1.68 billion in the first quarter, allaying concerns of any potential impact from the prolonged U.S.-China trade war.
“Even amid the increasingly volatile macroeconomic and geopolitical environment, we expect our unrelenting focus ... to continue fuelling strong, broad-based growth across our global portfolio,” chief executive officer Mark Parker said. Nike has been spending more in marketing after revenue hit $10 billion a quarter this year and as it grew faster than rival Adidas in Europe and China.
Gross margins expanded to 45.7 per cent in the quarter ended Aug. 31, higher than the 44.41 per cent anticipated by analysts, as it sold more products at full price.
“The big surprise was obviously the gross margins,” Edward Jones analyst Brian Yarbrough said. “When they sell through their own website, that’s a very strong margin and that’s growing very rapidly, becoming a bigger and bigger part of the business.”
Revenue in North America, its biggest market, rose 3.6 per cent to $4.29 billion, while sales from its digital platform, which includes apps and websites, grew 42 per cent.
Net income rose to $1.37 billion, or 86 cents per share, from $1.09 billion, or 67 cents per share, a year earlier. Revenue rose 7.2 per cent to $10.66 billion.
Analysts were expecting Nike to earn 70 cents per share and revenue of $10.44 billion, according to IBES data from Refinitiv.
Shares of the Oregon-based company were up at $92.23 in extended trading, putting them on course for a record open on Wednesday.