The company had much to cheer about as its earnings for the 2nd quarter ended on Nov. 30 rose by 14 percent to $4.3 billion, with substantial growth in all regions, although currency movements contributed 4 percentage points of the increase. European sales jumped by 18 percent to $1.2 billion, again with the help of currency changes that lifted revenue growth by 10 percentage points. Sales of all categories recorded double-digit rises in Europe, with a jump of 19 percent to $646.7 million for footwear, a rise of 15 percent to $485.9 million for apparel and a 24 percent hike to $91.6 million for equipment.
The most outstanding sales increases were witnessed in the Central Europe, Middle East and Africa (CEMEA) region, where emerging markets lifted their sales by 30 percent for the quarter. Standouts included Turkey and Russia, which posted respective sales increases of 39 percent and 45 percent for the quarter. Greece was quoted in the same breath. The CEMEA region as a whole is expected to surpass sales of $1 billion during the current fiscal year.
But Nike indicated that its sales had expanded in constant currencies in virtually all other European markets as well. The UK reported a double-digit sales increase, as it saw clear benefits from sustained brand-building and inventory clean-up measures taken last year. Germany returned to the double-digit club again and even France managed high single-digit sales growth. Furthermore, future orders for Europe at the end of quarter were up by no less than 19 percent in dollars or 13 percent in constant currencies.
Sales in the Americas increased by 14 percent in constant currencies and by 19 percent in dollars to $313.6 million, while the Asia-Pacific region saw its sales rise by 17 percent to $674.6 million, again with a contribution of 5 percentage points from currency effects.
China alone raised its sales by 37 percent for the quarter and was expected to surpass $1 billion in sales during the fiscal year. The Chinese expansion featured store openings as well as double-digit comparable sales growth. Nike managers were particularly pleased about the performance of their flagship store in Beijing, which has turned into one of their most productive outlets. After some tight quarters, Japanese revenues were up again by 2 percent.
Just as remarkably, U.S. sales continued to rise at a rate of 7 percent to $1.5 billion for the quarter. This combined a rise of 12 percent for footwear to $983.3 million with another increase of 9 percent for equipment to $68.7 million, and a sales drop of 3 percent in apparel to $461.4 million. Nike cited weakness in fashion-oriented apparel, a problem which has been sorted out over the last months.
Future orders from U.S. clients were up by just 1 percent at the end of the quarter. However, adding other regions Nike’s orders climbed by 13 percent in dollars or 10 percent in constant currencies.
Brands in the “other” group contributed sales of $613.7 million for the quarter, up by 16 percent. Converse in particular appeared unstoppable, pushing its revenues up by more than 40 percent for the quarter. However, this segment will see a decrease over the next quarters since Nike has confirmed the sale of its Starter brand to the Iconix Brand Group for $60 million last month and decided earlier this year to divest Nike Bauer Hockey – although it could not report any decisive progress on the matter so far.
All regions combined, the company’s gross margin rose by 0.9 percentage points to 44.3 percent for the quarter, and the company indicated that the weakness of the dollar only contributed a very small share of that increase. Europe posted the sharpest rise in pre-tax income, up by whopping 37 percent to $230.2 million. Global pre-tax income ended the quarter with an increase of 15 percent at £515.6 million, while net income was up by 10 percent to £359.4 million.
Adding the first quarter, Nike’s revenues rose by no less than 12 percent, ending very close to $9 billion. The group’s gross margin for the first half rose by 0.9 percentage points to 44.6 percent, and its net income jumped by 32 percent to $929.1 million, aided by a 20 percent drop in income taxes.
The company’s outlook remained roughly unchanged. For the second half it predicted low double-digit sales growth, due to growing demand as well as currency effects, while gross margins should be in line with the first half.
