Nike's Profit Rises on Stronger Demand in U.S. and China -- Update
December 20 2016 - 8:09PM
Dow Jones News
By Sara Germano
Nike Inc.'s quarterly profit rose 7% amid stronger demand in the
U.S. and China, and executives defended the company's performance
amid heightened sportswear competition.
In recent months, the world's largest sportswear maker has taken
steps to drive more direct sales, improve its online sales apps and
adjust pricing on some of its marquee products, such as its
signature basketball shoes. Still, the company has been dogged by
concerns that rivals Adidas AG and Under Armour Inc., as well as
so-called athleisure sellers, are sapping demand for its
products.
"I think there's a misconception that growth in our lifestyle
business comes at the expense of growth in our performance
business. The reality is they fuel each other," Nike Chief
Executive Mark Parker said Tuesday.
The company acknowledged that sales in its basketball division
fell short of expectations, particularly in two lines of its
signature basketball shoes. Nike said it addressed the problem with
new designs and lower prices, brand President Trevor Edwards said,
and expects the division's growth to resume in the second half of
the fiscal year. "To be clear, basketball is back," he said.
Last year, Foot Locker Inc. CEO Dick Johnson cited two Nike
signature basketball shoes -- those for LeBron James and Kevin
Durant -- which lagged behind in sales in part because of higher
prices. At the time, they were selling for close to $200 apiece.
Some versions of the shoes now appear with a suggested retail price
of about $150.
Nike executives also said they are working on developing a
faster supply chain, which they are calling the "express lane,"
aiming to bring products to market in weeks instead of months.
Nike's profit for the fiscal second quarter ended Nov. 30 rose
to $842 million, or 50 cents a share, from $785 million, or 45
cents a share, a year earlier. Revenue increased 6.4% to $8.18
billion. Excluding currency impacts, the company said, the top line
improved 8%.
Gross margin shrank 1.4 percentage points to 44.2%, as higher
average selling prices were more than offset by higher product
costs, unfavorable changes in foreign exchange rates and higher
off-price sales.
The company reported its futures orders, or wholesale orders set
for delivery over the next six months, are flat compared with the
comparable year-before period. At the company's first quarter
report in September, Nike reported a rise in futures of 5%. Nike
says that its growth in sales direct to consumers will lessen its
reliance on the metric, which has long been used as a proxy to
measure demand for swoosh products by Wall Street.
Nike shares, which have fallen 17% this year through Tuesday's
close, rose 1.5% after hours to $52.52.
--Anne Steele contributed to this article.
Write to Sara Germano at sara.germano@wsj.com
(END) Dow Jones Newswires
December 20, 2016 19:54 ET (00:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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