Athletic footwear company Nike (NKE, Financial) is one of the largest footwear retailers in this space. The great performance of this company is evident by a 25% increase in its share price in the last six months. This was helped by an increase of 9% in demand for athletic wears in the third quarter of this year. Further, this company continues to do well in its third quarter as well. The recently reported quarter was ahead of the Street's expectations, sending its share prices higher.
An overview
Revenue for the quarter grew 15% to $7.4 billion, over last year. This was higher than the analysts' estimate of $7.15 billion. The top line was driven by higher consumer demand across all the products. However, demand for golf products were not up to the mark. Another primary reason for rising sales was the World Cup, which drove revenue higher. The retailer opened women-only stores in two cities. This new concept attracted more of women, resulting in an increase in sales.
Converse was the best performing brand with an increase of 24% in its sales. Revenue from Nike also grew 17%, over last year. Thus, demand in both the brands registered growth.
Geographically, demand in China was on the rise as revenue climbed 20% over last year's quarter. Sales in Western Europe also surged 25%, as consumers continued to look for Nike's products.
Earnings grew 25% to $0.74 per share, as compared to the previous year. The bottom line was higher than the expectation of $0.70 per share. Factors such as share repurchases of 5.1 million shares and an expansion in the gross margin helped earnings grow.
Highlights
Categories that registered remarkable growth were the direct to consumer segment and growth in demand for basketball products. The ecommerce segment registered an increase of 70%, and the shoe retailer expects this growth to continue in the future. Basketball demand was driven by new product launches and the introduction of new technology such as the Air Zoom. The running segment also did well due to higher demand for women's and premium apparel.
There is a host of new products which are introduced in the last few months and are driving most of the customer traffic. The all new 12th LeBron James Signature shoes were released this quarter. Also, Nike launched the 18th version of Air Zoom structure rang. This new range is also available for customization with NikeID online and is priced from $120 to $170.
Further, the shoe company introduced Tech Fleece Aeroloft, a popular apparel range for the winters, along with the launch of LunarGlide6 in July and Kobe 9 Elite Low. All these products should help in attracting customer attention during the holiday season.
Moreover, Nike plans to invest more in marketing and R&D and plans to expand in China, where demand is on the rise.
To end up with
Although everything looks increasingly interesting for Nike, there is just one thing that bothered the investors. The future orders for December through April rose 7% only and were lower than the analysts' expectations. This was mainly because of weakness in Japan and other emerging markets. However, one of the key reasons for this was a higher benchmark this year, boosted by the World Cup event. Nonetheless, the company raised its revenue outlook to $30.75 billion from $30.68 billion for the current fiscal year, which reflects that the company is expecting a good quarter ahead. Overall, Nike is definitely a safe bet for the long run.
