Athletic apparel, footwear and accessories retailer,
) reported third quarter fiscal 2014 results wherein its earnings
per share of 76 cents rose 4% year over year and surpassed the
Zacks Consensus Estimate of 73 cents.
Results were driven by an impressive top line, lower tax rate,
improvement in gross margin and moderately lower average share
count, partly offset by higher selling, general and
administrative (SG&A) expenses and negative effect of
Excluding the impact of the currency, the top line surged 13% to
$7 billion on the back of robust demand for the company's brands
and significant growth in its main categories and all its
locations. Sales also came ahead of the Zacks Consensus estimate
of $6.8 billion. Further, at the company's Converse subsidiary,
revenues soared 16% to $420 million on a currency neutral basis,
powered by solid performance in the U.S., UK and China, all being
the company's biggest distribution centers.
Gross profit escalated 13.4% to $3,103 million with the gross
margin increasing 30 basis points (bps) to 44.5%. Gross margin
was facilitated by greater average prices, sustained growth in
the direct to consumer operations with high margins, partly
offset by greater discounts, greater product input expenses and
negative impact from exchange rates.
SG&A rose 16% to $2.2 billion, on account of an 18% rise in
demand creation cost and a 15% surge in operating overhead costs.
Demand creation costs surged 18% due to increased promotions
towards key product launches, investment in retail product
presentations and the forthcoming Football World Cup. On the
other hand, operating overhead costs were pushed by
infrastructure related investments, greater direct to consumer
expenses (owing to growth of same store sales and introduction of
new outlets) and expenses related to digital innovations.
Nike ended the quarter with cash and short-term investments of
$5,029 million, compared to $4,042 million last year. Improved
net income and proceeds from debt issuance led to this rise in
cash and short-term investments. Inventories advanced 12% to
Nike's long-term debt stood at $1,201 million, compared to just
$161 million last year. Shareholders' equity was $11,133 million
at the end of the quarter, as against $10,667 million last year.
During the quarter, Nike bought back 10.4 million shares worth
$788 million. This buy back was part of the 4-year authorization
worth $8 billion, made by the board in Sep 2012. So far under the
program, the company has bought back 39.6 million shares worth
The company's global future orders, slated to be delivered
between March - July 2014, soared 12% to $10.9 billion, from the
comparable prior-year period. This excludes the effect of
Nike's solid quarterly performance reflects its concentration on
making innovations, to keep up with its customers. In spite of
macroeconomic headwinds, the company's results remain impressive,
backed by its continuous focus on exploiting growth opportunities
along with managing its risk. Going forward, Nike plans to
continue doing this in order to enhance shareholder value in the
Other Stocks to Consider
This Oregon based retailer currently holds a Zacks Rank #3
(Hold). Other better-ranked stocks in the apparel-shoe industry
Iconix Brand Group, Inc.
) with a Zacks Rank #1 (Strong Buy) along with
Skechers USA Inc.
Columbia Sportswear Company
), both sporting a Zacks Rank #2 (Buy).
COLUMBIA SPORTS (COLM): 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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