Nike Q4 Profits Jump 22%; Leaders Expect World Cup To Boost '14 Sales
Nike's fiscal Q4 profit jumped 22%, "boosted by higher sales of shoes and apparel, while gross margins expanded for the second consecutive quarter," according to John Kell of the WALL STREET JOURNAL. Nike also "forecast growth" for the Q1 and full year that "met Wall Street's expectations, but warned sales in China would drop in the first half of the new fiscal year." Nike has had to make "changes to fit and color of the products it sells in China to better reflect consumer tastes." Still, Nike expects overall profit for fiscal '14 to "rise in the low double-digits on a percentage basis, as sales are expected to climb, helped later in the year as Nike gears up" for the FIFA World Cup in Brazil. Regionally, sales growth was "again impressive in the North American market." Sales also were "higher in emerging markets and Central and Eastern Europe, offsetting declines in Japan and Western Europe and a flat performance in greater China." Revenue grew 7.4% to $6.7B from '12, "roughly in line with Nike's expectation." By product category, Nike brand equipment sales "jumped 11%." In its "larger footwear and apparel business segments, sales for the quarter rose 7% and 6%, respectively." Nike said that sales "jumped in the key running and basketball categories, as well as for men's and women's training, offsetting declines in action sports and soccer." Last year's soccer sales were "boosted by strong demand ahead of the European Football Championships" (WALL STREET JOURNAL, 6/28). At press time, shares of Nike were trading at $61.71, down 0.98% from Thursday's close of $62.32 (THE DAILY).
MAKING PREDICTIONS: Nike VP & CFO Don Blair said, "Our reported results for China won’t always follow a smooth trajectory. It’s difficult to predict how quickly we’ll return to sustained growth.” In Portland, Allan Brettman notes the "unaudited figures show Nike was" a $25.3B company in FY '13, with revenues up 8% from last year’s $23.3B. Nike President & CEO Mark Parker on a conference call said that looking "forward to 2014, a year with the Winter Olympics as well as soccer’s World Cup, should prove as bountiful for Nike." Parker: “We’re set to grow, to explore, refine and leverage our leadership position” as the world’s largest sports footwear and apparel company. He added, “We have scale, power and passion, and we’re not shy about using them.” Several parts of the "hour-long conference call were spent paying homage" to Nike Brand President Charlie Denson, who announced last week he was retiring. Parker said Denson is a "brilliant and affable man, easy to respect and easy to like." Parker: "Charlie has showed the next generation what it takes -- and what it means -- to be a Nike leader" (Portland OREGONIAN, 6/28).
VIEW FROM THE STREET: CNBC contributor Jon Najarian said of Nike stock, "I would say, 'Just buy it,' and the reason is, well, LeBron James. That didn't hurt to have that (NBA Finals) series do as well as it did with viewers." Najarian also noted Nike is also moving into yogawear "in an aggressive fashion." Najarian: "As they move more and more into apparel, in particular this very lucrative yogawear, I think Nike is really going to hit. That's going to move margins up rather than compress them down." However, Fusion Analytics Chief Investment Officer Josh Brown said Nike is "relying on emerging markets to deliver the boost in sales that they're certainly not going to be able to get in developed markets and right now, that's not a bet that anyone on the Street wants to make" ("Fast Money Halftime Report," CNBC, 6/27).
CYBER SALES: In Baltimore, Lorraine Mirabella noted cited recent data from NPD Group that showed athletic shoe sales "are soaring, at least on the Internet." Sales grew 21% to $5B "in the year ending in April compared with the previous year." The company said that "even with the rapid growth, e-commerce sales make up less than one-fifth" of the $28B U.S. athletic footwear market, in which sales grew 5% year over year. NPD data also showed that online shoe shoppers "care more about brand, style and price than in-store shoppers." In-store shoppers "put more emphasis on comfort." A "higher percentage" of the footwear bought online was on sale -- 53% -- compared with the "share of on-sale footwear bought in stores," 47% (BALTIMORESUN.com, 6/27).
I'VE GOT A FEVER: In Miami, Mor & Castillo write the fact that the Air Jordan 1 shoes never went on sale is "just an example of how companies like Nike and Adidas fuel sneaker fever." They make special sneakers in "limited runs, and the fewer made, the more valuable they can become." Lifted by the popularity of the Heat and especially F LeBron James, Miami has become a "city that rivals Los Angeles and New York as a place where sneakerheads come to find the rarest limited edition shoes." For the "first crack at limited edition shoes, they flock to sneaker boutiques including SoleFly near South Miami." The shoes are a "big business for Heat players." James, G Dwyane Wade and F Chris Bosh are "prominently followed on sneaker blogs for their choice of footwear, and their endorsements of shoes carry significant weight" (MIAMI HERALD, 6/28).