) - a global leader in sports equipment and apparel - came up
with its third-quarter fiscal 2013 earnings of 73 cents per
share, which surpassed the Zacks Consensus Estimate of 67 cents.
Moreover, the quarterly earnings climbed 19.7% year over year,
resulting from increased revenues, improved margins, lower share
count and reduced tax rate.
Quarter in Detail
Nike's total revenue grew 9% year over year to $6,187 million
but fell short of the Zacks Consensus Estimate of $6,229 million.
Adjusting for the currency effect, the company's revenues
increased 10%. The year-over-year elevation in revenues was
primarily driven by robust performances across all geographical
regions barring Greater China and Japan. Moreover, the company
registered growth in all key categories excluding Sportswear and
On a currency neutral basis, revenues for Nike brands elevated
10%, while other businesses delivered 9% growth. Increase in
Nike's other businesses revenue was primarily led by strong
performance at Converse and NIKE Golf, which was partially offset
by weak sales at Hurley.
Nike's quarterly gross profit grew 10% from the year-ago
quarter to $2,736 million, and gross margin expanded 30 basis
points to 44.2%. The margin expansion mainly resulted from better
pricing actions and lower material costs, partially offset by
increased labor expenses, higher discounts in Greater China and
adverse foreign exchange rates. Another factor that pulled down
the gross margin was the switch of the NIKE Brand to a mix
focused on lower margin businesses.
Selling and administrative expenses increased 9% to $1,863
million, including a rise of 11% and 5% in operating overhead
costs and demand creation expense, respectively. Overhead
expenses rose on the back of increased investments in the
wholesale business and higher Direct to Consumer costs due to new
store openings and mounting expenses at existing stores.
Operating income for the quarter increased 12.4% year over
year to $873 million, while operating margin expanded 40 basis
points to 14.1%. The year-over-year expansion in margins was
primarily due to higher gross margin.
Global inventories increased 4% at the end of third quarter to
$3,329 million compared with $3,206 million in the same period of
fiscal 2012. The year-over-year increase in global inventories
was primarily led by a 7% rise in NIKE Brand wholesale unit
inventories, partially offset by a 3% negative impact from
unfavorable foreign currency translations.
Nike, which competes with
Deckers Outdoor Corporation
Skechers USA Inc
), ended the quarter with cash and cash equivalents of $2,557
million compared with cash balance of $2,021 million as of Feb
29, 2012. Moreover, the company has a long-term debt of $161
million and shareholders' equity of $10,667 million at the end of
During the quarter, this Zacks Rank #3 (Hold) company
repurchased 4.9 million shares for about $253 million under its
$8.0 billion share repurchase program approved in Sep 2012. Since
the beginning of this new share repurchase program, Nike has
repurchased 11.1 million shares at a cost of nearly $548
Global future orders for footwear and apparel scheduled for
delivery from March through July 2013 were up 6% to $9.9 billion.
Excluding currency effects, worldwide future orders increased 7%.
The year-over-year increase in future orders was led by an 11%
increase both in North America and Central & Eastern
Europe, 12% in Emerging market and 4% in Greater China. Future
orders in Japan and Western Europe declined 8% and 5%
In an effort to cut costs and sharpen focus on its NIKE,
Jordan, Converse and Hurley brands, Nike, in May 2012, revealed
its intention of divesting 2 of its brands - Cole Haan and Umbro.
The company's decision to sell these brands is guided by the fact
that the performances at the Cole Haan and Umbro brands failed to
match up to that of its other brands.
Going ahead with its pre-planned strategy, Nike, during the
second quarter of fiscal 2013 entered into an agreement to shed
certain assets of the Umbro brand to
Iconix Brand Group Inc.
). The deal closed at the end of 2012 and fetched $225
Moving ahead, in February this year, this global athletic
footwear retailer, successfully sealed the previously agreed upon
deal to sell its Cole Haan affiliate brand to Apax Partners for a
sum of $570 million.
Nike is the pioneer in the U.S. footwear and athletic apparel
industry. In an attempt to broaden its global reach and market
share, Nike is aggressively expanding its operations in the
emerging markets while focusing on direct-to-consumer business
and other brands, which augur well for its future operating
performance. Year-to-date, Nike exhibited significant strength by
innovative products and services that helped boosts its top and
bottom lines. Moreover, the company's near-to-debt free balance
sheet offers financial flexibility to drive future growth.
DECKERS OUTDOOR (DECK): Free Stock Analysis
ICONIX BRAND GP (ICON): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
SKECHERS USA-A (SKX): Free Stock Analysis
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