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Nike Earnings Blow By Estimates
SEPTEMBER 19, 2005 --
Nike was expected to report 1Q06 EPS of $1.40. It shocked doubters on Wall Street with EPS of $1.61. Revenue grew 8% and EPS increased 33% for the period. The company reported sales growth across each of its regions and product business units, with particular strength in US footwear in the quarter for both revenues and futures orders.
1Q revenues increased 8% to $3.9 billion, compared to $3.6 billion for the same period last year. Net income grew 32% to $432.3 million, or $1.61 per diluted share, compared to $326.8 million, or $1.21 per diluted share, for the prior year.
"A strong product pipeline and our global management team's ability to consistently execute across our brand portfolio drove very strong performance for the first quarter," said William Perez, president/CEOr. "Our results show continued healthy demand for NIKE product worldwide and we remain optimistic about our ability to meet our future goals."
The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from September '05 through January '06, totaling $4.9 billion, 11.0% higher than such orders reported for the same period last year. Changes in currency exchange rates had no significant impact on this growth.
By region, futures orders for the US increased 12%; Europe (which includes the Middle East and Africa) increased 4%; Asia Pacific grew 15%; and the Americas increased 32%. Changes in currency exchange rates reduced the reported futures orders growth in Europe by two percentage points. Futures orders growth in Asia Pacific was not significantly impacted by changes in currency exchange rates. In the Americas region, three percentage points of the increase were due to changes in currency exchange rates.
During 1Q, US revenues increased 8% to $1.5 billion versus $1.4 billion for 1Q05. US athletic footwear revenues increased 11% to $1.0 billion. Apparel revenues increased 1% to $395.5 million. Equipment revenues increased 4% to $92.3 million. US pre-tax income improved 7% to $345.2 million.
Revenues for the European region grew 5% to $1.22 billion, up from $1.16 billion for the same period last year. One pecentage point of this growth was the result of changes in currency exchange rates. Footwear revenues increased 3% to $685.1 million, apparel revenues increased 6% to $435.2 million and equipment revenues increased 14% to $97.2 million. Pre-tax income rose 34% to $330.2 million.
Revenues in the Asia Pacific region grew 13% to $459.6 million compared to $406.0 million a year ago. Three percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 9% to $237.4 million, apparel revenues increased 19% to $176.5 million and equipment revenues grew 18% to $45.7 million. Pre-tax income increased 44% to $91.4 million.
Revenues in the Americas region increased 32% to $213.7 million, an improvement from $161.7 million in 1Q05. Currency exchange rates contributed 12 perecntage points to this growth rate. Footwear revenues were up 37% to $156.9 million, apparel revenues increased 15% to $40.7 million and equipment jumped 41% to $16.1 million. Pre-tax income was up 119% to $44.6 million.
Other revenues, which include Converse, Nike Golf, Bauer Nike Hockey Inc., Cole Haan, Hurley International and Exeter Brands Group, grew 6% to $462.3 million from $434.5 million last year. Pre-tax income was essentially flat versus the prior year at $40.0 million.
Gross margins were 45.3% compared to 44.5% last year. Selling and administrative expenses were 28.6% of 1Q revenues, compared to 30.1% last year. This decrease in selling and administrative expenses as a percentage of revenue was due, in part, to a change in timing of certain marketing expenses. The effective tax rate was 34.5%.
At quarter-end, global inventories stood at $1.9 billion, an increase of 11% from August 31, '04. Cash and short-term investments were $1.9 billion at the end of the quarter, compared to $1.3 billion last year.
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