Ongoing currency pressures didn’t prevent Nike Inc. from posting a 16 percent increase in third-quarter profits that surpassed Wall Street’s expectations, but they did keep the athletic products giant from meeting anticipated revenue levels.
In the three months ended Feb. 28, Nike’s net income expanded to $791 million, or 89 cents a diluted share, from $682 million, or 75 cents, in the year-ago quarter. That was 5 cents above the analysts’ consensus estimate for EPS of 84 cents.
But the continuing strengthening of the dollar had a palpable effect on top-line results, producing a number of large discrepancies between reported and currency-neutral results. Even with the currency pressure, revenues rose 7 percent, to $7.46 billion from $6.97 billion, but would have risen 13 percent at constant currencies to nearly $7.9 billion. The consensus was for revenues of $7.62 billion, above the reported figure.
Citing currency pressures, uncertain input costs and a turbulent geopolitical landscape, Mark Parker, president and chief executive officer of Nike, commented on an afternoon conference call, “This is the environment in which all companies now operate, and Nike is not immune to it. The difference for Nike is that we see this as an opportunity to create further separation in the marketplace. Our globally diverse portfolio of geographies, categories, brands, product types and distribution channels gives us a distinct competitive advantage.”
Nike brand apparel revenues in the quarter rose 3.5 percent to $1.96 billion but were ahead 9 percent at constant currency. The brand’s footwear business grew 8.4 percent, to $4.57 billion, but were up 14 percent at constant currency.
Converse continued to gain momentum, with sales up 28.1 percent to $538 million and ahead 33 percent without the effects of currency fluctuation.
The company’s future orders, reflecting merchandise expected to be delivered between this month and July, were up 11 percent without the currency impact but ahead 2 percent with it. The strongest future orders number came from Greater China — ahead 22 percent overall and 23 percent at constant currency — followed by North America, up 15 percent on both bases.
Gross margin expanded to 45.9 percent of revenues from 44.5 percent a year ago, reflecting the company’s shift into higher-margin products and, in the case of its retail network, businesses.
Direct-to-consumer sales of the Nike brand were up 40 percent in the quarter, according to Trevor Edwards, president of the Nike brand.
After rising 0.8 percent to $98.32 during a difficult day on Wall Street, Nike’s shares continued to climb after the markets closed and it disclosed its quarterly results. In after-hours trading, the stock added another 4.3 percent, moving to $102.51. Their 52-week high, reached on Nov. 28, is $99.76.
In the first nine months of the fiscal year, the company’s net income expanded 20.7 percent to $2.41 billion, or $2.72 a diluted share, while revenues were up 12 percent to $22.82 billion.