By Sara Germano And Tess Stynes
Nike Inc. recorded a 4.8% increase in quarterly sales though
continued pressure from a stronger dollar weighed on revenue growth
and future orders.
Nike derives most of its income from North America, but more
than half of its sales are further afield, where economic and
foreign-exchange pressures weighed on its performance.
World-wide orders of Nike apparel and footwear for delivery from
June through November grew 2% from a year earlier, including
currency changes. That is well below the 11% increase that the
company reported for the year-earlier period but unchanged from the
last quarter. Excluding currency fluctuations, future orders rose
13% from a year ago.
Revenue rose to $7.78 billion in the three months ended May 31,
from $7.43 billion a year earlier. Excluding the impact of a
stronger dollar, sales improved 13%.
Shares rose 2.4% to $107.73 in recent after-hours trading
Thursday.
Nike has benefited from cultural trends that favor its products,
including the rise of athletically styled footwear and clothes
among consumers that aren't necessarily planning a workout, known
as athleisure.
The company also reaped rewards from a push to attract more
female consumers, such as opening women's-only retail concept
stores in Shanghai and London and hosting women's-only road races.
Wholesale orders for Nike women's wear rose 15% to $5.7 billion
from a year ago.
The athleisure trend has also affected the broader running-shoe
market, where sales of lower-priced, fashion-focused shoes are
driving growth, more so than technical models targeted at athletes.
Nike brand president Trevor Edwards said the company has
strengthened sales in its midtier running-shoe category, after
expressing some weakness last quarter.
Total sales of running products, the company's largest category,
grew 5% to $4.9 billion for the year.
Overall, Nike reported a 24% increase in profit to $865 million
as tax costs fell and margins improved. Gross margin rose to 46.2%
from 45.6%, mostly on higher prices and continued growth in its
higher-margin direct-to consumer business.
Nike spends billions of dollars each year on what it calls
demand creation expense, including marketing and sports
endorsements for high-profile athletes and teams, which tends to
fluctuate around marquee events. In the period, Nike reduced such
spending by 6.5% to $819 million, largely due to increased spending
for last summer's World Cup.
That figure is likely to grow ahead of next year's Summer
Olympics, an event which is typically a launchpad for new designs,
like the Flyknit shoes introduced ahead of the 2012 London
Olympics.
Another upcoming expense: the company will begin outfitting the
National Basketball Association starting in the 2017-2018 season,
in an eight-year deal valued at more than $1 billion, according to
a person familiar with the matter. The company already maintains a
lock on more than 90% of the U.S. basketball shoe market, between
its Nike and Jordan brands.
Chief Executive Mark Parker said the company could invoke the
use of three of its brands--Nike, Jordan, and Converse--into its
deal with the NBA.
Write to Tess Stynes at tess.stynes@wsj.com
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