News Column

North America sales increase help Nike improve profit

June 27, 2014

Bloomberg News

New York: Nike, the world's largest sporting-goods maker, posted fourth-quarter profit that topped analysts' estimates as running and basketball gear drove sales in North America.

Net income in the quarter ended May 31 rose 5.4 per cent to $698 million, or 78 cents a share, from $662 million, or 73 cents, a year ago, the Beaverton, Oregon-based company said in a statement.

Nike is benefiting from consumers increasingly buying athletic apparel and gear for everyday wear, not just when working out or playing sports. The trend has helped the company generate growth in mature markets such as North America, where sales gained 10 per cent to $3.29 billion last quarter, topping the $3.13 billion average estimate from Consensus Metrix.

"Everything from Nike Free to their running business to the basketball business remains very solid," Brian Yarbrough, an analyst with Edward Jones in St. Louis, said in an interview. "They continue to innovate and bring products to the marketplace."

Orders rise

Orders for the Nike brand for delivery from June through November rose 12 per cent, excluding the effects of foreign-currency exchange-rate fluctuations. Analysts estimated an 11.7 per cent gain, on average, according to Consensus Metrix, a researcher owned by Wayne, New Jersey-based Kaul Advisory Group. The measure, known as futures orders, is closely watched because investors view it as a proxy for future sales.

Total sales rose 11 per cent to $7.43 billion. Analysts projected $7.34 billion, on average. Revenue in Nike's Greater China division increased 3.5 per  cent to $702 million, topping analysts' $666.4 million average estimate. The company had been struggling to maintain growth in China, its second-largest market, as shoppers there became choosier about which brands they buy. Futures orders in the unit advanced 6 per cent, more than double analysts' 2.5 per cent projection.

In March, Nike said sales would increase at a high single-digit percentage rate. -  Bloomberg News, with results hampered by a strong dollar that reduces the value of its international sales. The strength of the U.S. currency also would weigh on earnings growth, the company said at the time. Nike said that currency reduced pretax income by $30 million in the quarter.

Digital strategy

Nike has been revamping its digital strategy, scaling back its wearable hardware offering and instead focusing on its activity-tracking software. The company recently cut or transferred most of the people who worked on its FuelBand sensor-equipped bracelet. While CNET reported this year that Nike plans to stop making the device, the company has said that it will continue to "sell and support" the latest version, Nike+ FuelBand, for the "foreseeable future."

The company earlier this month added EBay chief executive officer John Donahoe to its board to bring e-commerce experience.

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Source: Times of Oman

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