Beaverton, OR—Despite sagging sales in Greater China that resulted in an 18% drop in its second quarter profit, Nike’s earnings report released Thursday still managed to beat analysts’ estimates.
For the quarter ended Nov. 30, the athletic wear and footwear maker posted net income of $384 million, or $1.14 a share, compared to a profit of $469 million, or $1.05 a share, a year earlier. While the decline was mainly due to lower overseas sales, Nike’s earnings still beat analysts’ average estimate expecting $1 a share.
Total revenue rose 7% to $596 billion in line with analysts’ expectation for $5.99 billion. Excluding the impact of foreign currency fluctuations, revenues would have grown 10%.
The sales increase was largely the result to improved sales in North America, Europe and other markets. Its Greater China sales dropped 11% to $577 million including a 16% drop in apparel revenue to $224 million.
Revenues for Nike’s other businesses increased 6% on a currency-neutral basis, as Converse, Hurley and NIKE Golf all increased revenues during the quarter.
North American Sales Jump
Sales in North America, however, rebounded strongly, rising 17% to $2.42 billion compared to a 2% decline to $897 million in Western Europe to and a 2% increase to $266 million in Central and Western Europe. Sales in Japan rose 11% to $219 million.
Nike reported that total orders for its Nike brand from December to April grew 7% excluding currency exchanges. That’s in line with analysts’ estimates for a 7.1% gain.
Orders for September to January rose 8%. Meanwhile, in the same period, orders from China decreased 7% on top of a 6% decline in the previous period.
“Our strong second quarter results show that our growth strategies are working, even under challenging macroeconomic conditions,” Mark Parker, chief executive, said in a statement.
However, for the eighth quarter in a row, the company’s gross margin narrowed to 42.5% from 42.8% the year before amid higher labor costs and unfavorable forex rates.
Total selling and administrative expenses grew 6% to $1.84 billion. Nike said its inventories at quarter-end stood at $3.3 billion, up 9% from a year earlier.
The better-than-expected fiscal second quarter earnings came nearly a week after the Oregon Legislature agreed to calculate Nike’s state taxes the same way for 30 years with the company pledging to make a capital investment of at least $150 million and create a minimum of 500 new jobs in Oregon by 2016.