Nike Inc. reported its fiscal first-quarter profit rose 15 percent as demand grew for its sneakers and athletic apparel in nearly every market worldwide despite an uncertain global economy.
The results, which were reported after the close of the stock market on Thursday, beat Wall Street's expectations and sent its shares up in after-hours trading.
Under the weight of political uncertainty, turbulent stock markets and renewed fears that the U.S. and the global economy are headed for recession, people are more closely watching every dollar they spend. Despite the economic pressures, consumers have shown a willingness to spend on some of their favorite brands like their Nike sneaks, Starbucks coffee and McDonald's hamburgers.
"We all know that the economic uncertainty that we're seeing in the world today is putting pressure on consumers around the world," said Mark Parker, Nike's CEO. "Yet, in most countries, we continue to see solid growth in footwear and apparel sales, which tells me ... that consumers everywhere are ready to buy when they feel good about what they get for their money."
Nike, the world's largest athletic shoe and apparel maker, said that's why sales improved in nearly all markets, including strong gains in the U.S. and emerging markets like India and China. Revenue from North America, which is its largest market, rose 16 percent to $2.2 billion. In emerging markets, revenue soared 35 percent to $799 million.
The only market that did not get a boost was Western Europe, where revenue grew by 14 percent but was flat after adjusting for currency exchange rates. In that market, worries about unemployment and other economic pressures are high and the prior year included a boost from people buying merchandise related to World Cup soccer.
Overall, Nike's revenue rose 18 percent to $6.08 billion, with particularly strong performance in its running, basketball and women's training business. That's above the $5.75 billion analysts polled by FactSet were expecting.
Nike benefited from favorable exchange rates in every region. Its total revenue, excluding the impact of foreign exchange rates, rose 11 percent to $5.18 billion. The strong sales worldwide more than offset the higher costs for labor, freight and materials Nike had during the period.
As a result, Nike earned $645 million, or $1.36 per share, for the quarter that ended Aug. 31, up from $559 million, or $1.17 per share, in the same quarter last year. The results far exceed the $1.21 per share Wall Street was expecting. Nike said it benefited from lower tax rates and the repurchase of 7.7 million shares.
Going forward, Nike said it expects higher costs to continue to be a challenge. But the company said the picture should improve in the second half of the year as costs stabilize and it raises prices even higher for the holiday, spring and summer seasons.
There also are a number of major sporting events ahead, including March Madness and the Olympics, which Nike leaders said should provide a boost to its results this year. Nike management said it has several strategies in place if the NBA lockout continues. And with college basketball and the buildup to the Olympics, Nike officials remain bullish on basketball.
"In the new normal of global economic volatility, balance is critical," said Don Blair, Nike's chief financial officer. "We're confident we have the capability to strike a balance that delivers sustainable, profitable growth for our shareholders."
Nike does not typically issue guidance but said that it expects revenue to increase in the mid- to high teens for the second quarter and revenue growth in the low- to mid-teens for the full year as price increases take effect and it rolls out new products.
The company also said orders scheduled for delivery from now through January are 16 percent higher than in the same period last year. Investors closely watch this figure for Nike as it can provide some insight into retailer's confidence moving into the coming season.
Shares of Nike, which is based in Beaverton, Ore., fell $1.58 to close at $84.18 as the markets plunged overall on global recession fears. But the stock rose nearly 5 percent after hours.