Nike Q1 Profit Leaps 38% on Better Sales, Gross Margin

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Tennis star and Nike brand ambassador Serena Williams layers the Black Nike Tech Fleece Windrunner.

Tennis star and Nike brand ambassador Serena Williams layers the Black Nike Tech Fleece Windrunner.

Beaverton, OR—Nike reported Thursday a 38% leap in its first quarter profit helped by improved gross margins and sales increases across the globe.

For the quarter ended August 31, the athletic apparel and footwear company posted a profit of $780 million, or 86 cents a share, compared with a profit of $585 million, or 63 cents a share, a year earlier. Analysts’ average estimate expected earnings of 78 cents a share.

Net revenue 8% to $6.97 billion, matching analysts’ estimate. Nike said it benefitted from strong demand in the United States and other markets. Only China showed a sales decline. Best performing categories included basketball and running, soccer and men’s training. Sales in those categories offset a slight decline in sportswear, the company noted.

Sales in North America increased 9% to $3.14 billion as equipment sales rose 13%. Despite economic difficulties, sales in Western Europe rose 8% to $1.30 billion while sales in Central and Eastern Europe rose 10% to $366 million. Sales in emerging markets rose 5% to $902 million. Sales in Japan edged up 1% to $158 million.

China Still a Struggle

China continues to be a struggle for the athletic wear giant. Sales in Greater China fell 3% to $574 million as footwear sales dropped 7%.

CEO Mike Parker told analysts in a conference call that the slowdown in China was anticipated and was caused in part by a slowing Chinese economy, excess inventories and misreading trends with the Chinese consumer.

“The Nike brand remains on top as the leading sport brand in China,” Parker said. “As we continued to make progress on repositioning this market for long-term sustainable growth, I have to say I am truly excited about the progress we’re making in this key market and the opportunity it represents.”

Nike’s profit jump was helped by lower raw material costs and a shift to higher margin products. That resulted in a widened gross margin to 44.9% from 43.7%. Analysts had expected 43.8%.

Nike also said its global futures orders, were up 10% compared with analysts’ estimate for 8%. North American orders increased 12%, besting forecasts for 9.9%. Inventories were up 6% as of the end of August.

“We had a great first quarter driven by our unrelenting commitment to delivering innovative products and services to athletes around the world,” Parker said.