Nike First Quarter 2014 Results Shows Growth

Written by: Bob Larson Tennis on 2nd October 2013

Nike First Quarter 2014 Results Shows Growth

epa01925313 The shadow of Russian tennis player Nikolay Davidenko is cast on the court as he returns the ball to his compatriot Mikhail Youzhny during their Open 500 semi-final match against in Valencia, eastern Spain, 07 November 2009. Youzhny defeated Davidenko 3-6, 6-4 and 6-3. EPA/KAI FOERSTERLING |

Nike reported financial results for its fiscal 2014 first quarter, which ended August 31, 2013. Strong demand for its brands propelled revenue growth, and diluted earnings per share grew faster than revenue.

“We had a great first quarter driven by our unrelenting commitment to delivering innovative products and services to athletes around the world, said Mark Parker, President and CEO of Nike, Inc. “Our powerful portfolio of businesses combined with unmatched leadership and resources allows us to capitalize on opportunities that drive long-term value for our shareholders. I am more excited than ever about our potential to continue to innovate with purpose, and fuel Nike’s growth.

Revenues for Nike Inc. increased 8 percent to $7.0 billion. Changes in foreign currency exchange rates did not have a significant impact on total reported revenue growth. Revenues for the Nike Brand were $6.5 billion, up 7 percent on a currency neutral basis, with growth in every product type and every geography except Greater China.

For the first quarter, Nike Brand revenues were higher in Running, Basketball, Football (Soccer) and Men’s Training, offsetting a slight decline in Sportswear.

Revenues for its subsidiary Converse were $494 million, up 16 percent on a currency neutral basis, driven by strong performance in our largest owned markets: the United Kingdom, North America and China.

Gross margin increased 120 basis points to 44.9 percent. Selling and administrative expense was in line with the same period last year at $2.1 billion. Demand creation expense was $731 million, down 16 percent versus the prior year, which included higher spending supporting key product initiatives, as well as the Olympics and European Football Championships.

Operating overhead expense increased 12 percent to $1.3 billion due to investments in digital innovation and other growth businesses, as well as higher Direct to Consumer costs driven by growth and new store openings.

Net income increased 33 percent to $780 million while diluted earnings per share increased 37 percent to $0.86, reflecting a 1 percent decline in the weighted average diluted common shares outstanding.

Inventories for Nike, Inc. were $3.5 billion, up 6 percent from August 31, 2012. Nike Brand wholesale unit inventories increased 8 percent to support future demand.

Cash and short-term investments were $5.6 billion, $2.3 billion higher than last year mainly as a result of proceeds from the issuance of debt and sale of the Umbro and Cole Haan businesses in the prior fiscal year, in addition to higher net income and continued focus on working capital productivity.

During the first quarter, Nike, Inc. repurchased a total of 8.4 million shares for approximately $526 million as part of the four-year, $8 billion program approved by the Board of Directors in 2012. At of the end of the first quarter, a total of 23.7 million shares had been repurchased under this program at a cost of approximately $1.3 billion.

Also at of the end of the quarter, worldwide futures orders for Nike Brand athletic footwear and apparel scheduled for delivery from September 2013 through January 2014 were 8 percent higher than orders reported for the same period last year.

Analysts are split as to whether Nike’s share price is too high. As of Tuesday, it was trading at around $72 after trading as low as $44 earlier this year.

“Back in March of this year, I last took a look at Nike’s prospects,” wrote an analyst for Value Investor. “In the meantime, shares have risen another 25%. I concluded at the time that the strong growth momentum, innovations and strong market positions would structurally boost margins, and thereby earnings growth for the foreseeable future. Yet I had not envisioned such strong returns in the meantime. The strong customer engagement, innovation in sports equipment and technological apps and devices to keep track of the performance, are all boosting customer satisfaction and Nike’s bottom line. Management sees the business stronger than ever before. Shares have already risen some 50% year to date, boosting the valuation to 26 times last year’s earnings, which is a bit rich even for this superior global brand. I remain on the sidelines. I am a great fan of the company, its products, but not of the current share price, or better said its valuation.”

But the investment firm Agurs recently upgraded Nike to a Buy rating with a fresh price target of $84. However, another firm, Stifle, downgraded it from a Buy to a Hold.

Nike is one of the most important members of the tennis industry, endorsing many of the top players including Roger Federer, Rafael Nadal, Maria Sharapova and Serena Williams.

Topics: 10sballs.com, Maria Sharapova, Mark Parker, Nike, Rafael Nadal, Roger Federer, Serena Williams, Tennis, Tennis News