Nike profit trumps Street, strong dollar weighs on forecast

Nike Inc's quarterly profit beat market estimates as the world's largest sportswear maker sold more higher margin shoes and apparel, but the company warned Wall Street that the stronger dollar would take a toll on its current quarter.

Investors, however, ignored the warning, sending its shares up 4.5 percent to $102.75 in heavy after-hours trading on Thursday.

Orders for shoes and apparel scheduled for delivery from March through July 2015 at the end of the third quarter, a gauge of demand Nike calls "futures orders," rose 11 percent globally, excluding the impact of currency exchange rate fluctuations. Analysts had expected a 9.9 percent rise.

Futures orders growth would have been even higher if the results were not compared to the strong growth last year due to the soccer World Cup, Trevor Edwards, president of the Nike brand said on a post-earnings conference call.

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"This is another just rock solid quarter .. it is really impressive for a company of this size ... they are firing on all cylinders," Edward Jones analyst Brian Yarbrough said, pointing to Nike's forward orders beat, profit jump and gross margin expansion due to increased sales of high margin products.

Sales of footwear, the company's largest and most profitable business, rose 8 percent in the third quarter, while apparel sales rose 3 percent, Nike said.

Demand for the company's Jordan, LeBron, Kobe and KD basketball shoe brands have been strong in the United States. The company's running shoe brands, including Free 5.0, Roshe Run, Huarache, and Max Air, have also been doing well.

Nike said it expects current-quarter sales growth to be in the "low double-digits", adjusting for currency fluctuations. When accounting for the stronger dollar, the growth is expected decrease by about eight to nine percentage points.

The growing strength of the dollar will also hurt the company's revenue, gross margin and profit next year, Chief Financial Officer Don Blair said on the call.
Net income rose 16 percent to $791 million, or 89 cents per share in the third quarter ending Feb. 28. Gross margins expanded 1.4 percentage point to 45.9 percent.

Revenue from North America rose 6 percent in the quarter, while sales in western Europe and China showed double-digit growth.

Total revenue increased 7 percent to $7.46 billion.

Analysts on average expected a profit of 84 cents on revenue of $7.62 billion, according to Thomson Reuters I/B/E/S.

$1 = £0.68