Nike quarterly profit beat Wall Street's expectations, as margins increased and worldwide future demand for its apparel and shoes rose, sending its shares up 8 per cent.
Global orders for Nike-branded shoes and clothing scheduled for delivery from March to July 2013, known as futures orders, rose 6 per cent compared to orders reported for the same period last year. In North America, the company's biggest market, orders increased 11 per cent.
The company also saw a turnaround in future demand in Greater China, with orders rising 4 per cent, after falling in the previous two quarters.
"They turned China much faster than we thought," said Edward Jones consumer discretionary analyst Brian Yarbrough. He added said this turnaround was important as China is among Nike's highest margin markets. Lower shipping costs and high price tags help the company make more money on their products in that region, he said.
"In China, we are seeing progress against our strategy to reset the marketplace but we still have more to do before we can capture its long-term growth potential," Nike chief executive Mark Parker said on a conference call with analysts.
Nike had been stuck with excess inventory in China and was finding it difficult to tackle intense competition and frequent promotional sales by local brands. Distributors and retailers were also wary of an uncertain global economy.
Shares rose to $57.93 (€44.88) yesterday in extended trade and closed at $53.60 on the New York Stock Exchange.
Paul Swinand, an analyst with Morningstar, said one of the biggest challenges for Nike is to grow in its more mature markets. He said strong demand in North America shows it is able to do that.
Nike also posted its first growth in gross margins in around two years, with margins rising 30 basis points in the quarter. High costs of raw material and labour pressured the company's margins over the past couple of years and Nike had been fighting it by raising prices on merchandise.
"Gross margin benefited from the combination of pricing actions and easing material costs, which more than offset higher labour costs," the company said.
For the third quarter ended February 28th, the company earned $662 million, or 73 cents a share, compared with $569 million, or 61 cents a share last year. Revenue rose 9 per cent to $6.2 billion.
Reuters
