Sports equipment and apparel leader
) yesterday came up with robust first-quarter fiscal 2014
results, driven primarily by strong demand for NIKE branded
products. The company's earnings from continuing operations of 86
cents per share climbed 37% year over year and beat the Zacks
Consensus Estimate of 78 cents. The year-over-year bottom-line
growth was primarily due to an increase in both revenues and
margins, along with reduced tax rate and lower share count.
Better-than-expected quarterly results boosted investors'
confidence as was reflected in the company's share price which
soared 6.34% to $74.80 in the extended trading hours.
Quarter in Detail
Nike's total revenue grew 8% year over year to $6,971 million
but marginally fell short of the Zacks Consensus Estimate of
$6,973 million. During the quarter, effects of the currency
exchange rate were negligible on Nike's top-line growth. The
year-over-year rise in revenue was primarily driven by robust
performances across all geographical regions, except for Greater
China. Moreover, the company registered growth in all the product
Nike has announced that from first-quarter fiscal 2014, its
reporting segment structure has undergone a change. The company's
Hurley and NIKE Golf businesses, which were earlier reported as
Other Businesses, are now included under the NIKE Brand segment.
Moreover, its Converse business is now reported as a separate
segment. With this, Other Businesses segment has ceased to
During the reported quarter, revenues of NIKE Brand grew 7%
year over year to $6,468 million while the Converse segment
registered a revenue increase of 18% to $494 million, primarily
driven by strong performances in the U.K., North America and
Nike's gross profit grew 11% from the year-ago quarter to
$3,132 million, and gross margin expanded 120 basis points (bps)
to 44.9%. The margin expansion mainly resulted from better mix
toward higher margin products and lower material costs, partially
offset by increased labor expenses and adverse foreign exchange
Selling and administrative expenses were almost flat year over
year at $2,056 million, as a rise of 12% in operating overhead
costs were fully offset by a decline of 16% for demand creation
expense. Overhead expenses rose due to increased Direct to
Consumer costs, resulting from new store openings and mounting
expenses at existing stores as well as investments in digital
innovations and other businesses.
Income before interest and other expenses and income taxes for
the quarter rose nearly 40% year over year to $1,076 million,
while as a percentage of sales it expanded 350 bps to 15.4%. The
year-over-year expansion in margins was primarily due to higher
gross margin and leveraged operating selling and administrative
Global inventories increased 6% at the end of quarter to
$3,472 million, compared with $3,263 million at the end of
year-ago comparable quarter. The increase was primarily led by an
8% rise in the NIKE Brand inventories.
Nike ended the quarter with cash and short-term investments of
$5,578 million, up approximately 70.7% from $3,267 million as of
Aug 31, 2012. Increase in cash and cash equivalents was due to
proceeds from the issuance of debt in fourth-quarter fiscal 2013,
sale of Umbro and Cole Haan businesses, a higher net income, and
enhanced working capital productivity. Moreover, the company has
a long-term debt of $1,207 million (excluding current maturities)
and shareholders' equity of $11,282 million at the end of first
During the quarter, this Zacks Rank #3 (Hold) company
repurchased 8.4 million shares for about $526 million under its
$8.0 billion stock repurchase program approved in Sep 2012. Since
the beginning of this new stock repurchase program, Nike has
repurchased 23.7 million shares for nearly $1.3 billion.
Global futures orders for NIKE Brand footwear and apparel
scheduled for delivery from Sep 2013 through Jan 2014 were up 8%.
The year-over-year increase in futures orders was led by 11%
increase in North America, 25% in Central & Eastern Europe,
12% in Western Europe, 3% in Greater China and 1% in Emerging
Markets. However, future orders in Japan declined 19%.
Other Stocks to Consider
Currently, Nike carries a Zacks Rank #3 (Hold).
Better-performing stocks in the retail industry include
Deckers Outdoor Corporation
Brown Shoe Co. Inc.
). All of these have a Zacks Rank #2 (Buy).
BROWN SHOE CO (BWS): Free Stock Analysis
CARTERS INC (CRI): Free Stock Analysis Report
DECKERS OUTDOOR (DECK): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
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