Nike Shows Athletic Apparel Market in Growth Mode
Shares of global athletic apparel retailer Nike (NYSE: NKE) soared on Friday after the company released its fiscal third-quarter earnings on Thursday after the closing bell.
In afternoon trade, the stock had added better than 11 percent and was trading at $59.74 after putting in a new 52-week high earlier in the day.
The company reported that worldwide futures orders for Nike branded apparel for delivery in March through July was up six percent to $9.9 billion.
The biggest gain came in North America where futures orders were up 11 percent. Nike experienced strong growth in the North American market while sales oversees lagged.
Nike reported that North American sales climbed 18 percent in the most recent quarter to $2.5 billion. Revenue in Western Europe was up eight percent to $1.0 billion and the Central and Eastern European market grew 16 percent to $266 million.
In Asia, sales fell both in China and Japan with Greater Chinese revenue falling nine percent to $635 million and sales in Japan declining 13 percent to 175 million. Emerging markets revenue in the quarter was up six percent to $839 million.
The company reported adjusted income of $662 million or $0.73 per share, compared to $560 million or $0.61 per share, in last year's corresponding period. This easily beat Wall Street consensus estimates of $0.67 per share.
Total sales in the period grew nine percent to $6.19 billion from $5.66 billion last year. This just missed Wall Street revenue estimates of $6.23 billion. Gross margin in the quarter rose to 44.2 percent from 43.9 percent last year.
Overall, this was a very strong quarter for Nike despite the slight revenue miss. The stock is now sitting at new all-time highs and the company appears to be firing on all cylinders. Although slowing growth in Asia is a concern, Nike has been able to make up for it with a surging North American business and strong growth in other regions.
The news from Nike also bodes well for other athletic apparel retailers such as Lululemon Athletica (NASDAQ: LULU) and Under Armour (NYSE: UA). Both of these stocks have been elite growth names in recent years and the companies have shown that the apparel market has significant room for expansion.
In its most recent quarter, Nike reported that its footwear sales were up nine percent to $3.7 billion, apparel sales rose seven percent to $1.6 billion and equipment sales grew 22 percent to $325 million.
The numbers suggest that the athletic apparel market is in growth mode right now as the world economy continues to recover from the financial crisis. Lululemon released its fiscal fourth-quarter earnings results in recent days, with revenue surging 31 percent in the period.
Both the companies earnings per share and revenue was above Wall Street estimates. Looking ahead, however, Lululemon guided for some weakness in the upcoming quarter on account of a yoga pants recall.
On Friday, Under Armour shares are reacting very positively to Nike's earnings results, rising better than four percent. Although the stock has been underperforming in 2013, only rising around 4 percent, the company has been a long-term winner. In many ways, investing in Under Armour today may be akin to investing in Nike many years ago and both of these stocks look like solid bets for the rest of 2013.
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