Nike profit up 3 percent in 2Q

AP News
Posted: Dec 20, 2011 6:59 PM
Nike profit up 3 percent in 2Q

Nike Inc.'s second-quarter profit rose 3 percent as strong demand and higher prices for its shoes, clothes and gear offset increased costs.

Nike and other consumer product companies have been coping for some time with higher costs for materials, labor and freight. But while others have struggled to regain their footing in the weak U.S. economy, the world's largest athletic shoe and clothing company has been able to increase sales and raise prices without consumer backlash.

"We're able to accomplish this by staying focused on what we do best - deliver innovative products and experiences that serve athletes, inspire consumers and reward our shareholders," said Mark Parker, Nike's CEO.

The company, based in Beaverton, Ore., reported Tuesday that it earned $469 million, or $1 per share, for the quarter that ended Nov. 30. That's up from $457 million, or 94 cents per share, in the same quarter last year. Nike's total revenue increased 18 percent to $5.73 billion as it sold more of its branded products in nearly every market around the globe.

The quarter beat analysts' expectations for the quarter of 97 cents per share on revenue of $5.63 billion, according to FactSet.

During the quarter, some of its most popular lines were in basketball and running, with Nike noting that it hasn't seen this much energy around running since the original boom in the sport during the 1970s. Additionally, strong sales at Converse more than offset lower revenue from the Nike Golf, Cole Haan, Hurley and Umbro brands.

Nike leaders expressed confidence in the company's future sales growth as the NBA season resumes and it prepares to launch a number of new products in anticipation of major athletic events such as the summer Olympics.

As an indication of what is ahead, Nike disclosed that orders for items that were scheduled to be delivered between December and April rose 13 percent by comparison to the same period last year. Investors keep a close eye on this measure as an indicator of demand for the coming period.

Going forward, some of Nike's costs are beginning to ease up. But the company said that won't make a difference to its bottom line for several quarters.

Nike plans to raise prices further this year to help relieve some of its margin pressures. The company did not disclose how much it will increase prices but said the hikes would be larger than those put in place during the past year. As a result of these price hikes and a seemingly endless appetite for its products, the company expects its gross margin declines to narrow over the balance of the year.

Nike's shares rose 25 cents to close at $93.63 in regular trading. Shares rose $2.37, or more than 2 percent, to $96.00 in after-hours trading on the news.