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Finance

Nike Expects Continued Growth Following 4% Increase In Q2 Sales, 20% Rise In Profit

Nike on Tuesday posted sales figures for Q2 '16, and the company said that it "expects continued growth the remainder of the fiscal year" after the quarter which ended Nov. 30 had sales up 4% from the same period a year ago, to $7.7B, according to Allan Brettman of the Portland OREGONIAN. Profit for Q2 increased 20% to $785M, compared to $655M for the same period last year. Orders for the next three months were 15% higher than at this time last year. Several geographical areas "showed strength for the quarter," with a 10% sales increase in North America, 12% in Western Europe, 15% in Central and Eastern Europe and 28% in Greater China. Revenues declined 5% for the company's Converse subsidiary, but Nike officials "sounded a note of optimism." They said that the brand "would continue to diversify." Brettman notes that diversification "was demonstrated with the introduction in July of a more comfortable, and more expensive, Chuck Taylor All-Star" (Portland OREGONIAN, 12/23). The WALL STREET JOURNAL's Sara Germano notes while Nike "beat profit estimates for the 14th straight quarter, executives cautioned that gross margins may weaken slightly in the next period as Nike works to clear excess inventory in North America." Execs said that the company "is making way for new products geared toward next year’s summer Olympics and other high-profile events." World-wide future orders, a benchmark "widely used as reference for demand for Nike products, rose 20% excluding currency effects." Those orders "reflect items scheduled for delivery" between December '15 through April '16 (WALL STREET JOURNAL, 12/23). At presstime, shares of Nike were trading at $129.06, down 2.12% from the close of business Tuesday (THE DAILY).

FUTURE ENDEAVORS: Citi Research Analyst Kate McShane called Nike a "very well-managed company" and noted the 20% futures numbers are its largest over the past 15 years. CNBC’s Joe Kernen said, “The Olympics have something to do with it.” But McShane replied, “Encouragingly, Olympics weren't in this future's window yet.” McShane said of how to reenergize the market in China, “What's so exciting I think about Nike, and so revolutionary about them, is that they have been able to kind of revitalize the marketplace. Not just in growing emerging markets like China for the brand but for places like North America. They have really honed in on what the consumer wants and they have been able to merchandise it in a much more effective way, while securing floor space and market share” ("Squawk Box," CNBC, 12/23). CNBC’s Jim Cramer said of Nike, “The Jordan 30th anniversary has really paid off big particularly in China. With the exception of Brazil ... there is not a single area of the world that these guys are not blowing it away. This is so impressive.” Cramer continued, “They're using the cash to reinvest because there are so many opportunities, trying to strike the right balance between the short and long term." Cramer said, “This is just literally one of these companies that has figured out what you want, like Amazon, and delivers it and charges a pretty good amount for it (“Squawk on the Street,” CNBC, 12/23).

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