(Reuters) - Nike Inc (NKE.N), the world’s largest footwear maker, reported better-than-expected quarterly revenue and profit, and indicated a rebound in its basketball category.
The company’s shares were up 1.7 percent at $52.67 in after-market trading on Tuesday.
Nike’s basketball business has come under pressure, particularly from rival Under Armour’s (UAA.N) NBA-star Stephen Curry’s signature shoe line.
In response, Nike has redesigned its basketball products and delivered better priced products, such as the Jordan 31 and Kobe A.D.
“We’re seeing incredible momentum in basketball, to be clear, basketball is back,” Trevor Edwards, president of the Nike Brand, said on a conference call.
The company expects its basketball category to return to growth in the back half of its year ending May 2017, Edwards said.
Basketball category accounted for 5.1 percent of Nike’s total wholesale revenue of $27.23 billion in its financial year ended May 2016. The Jordan brand, which also sells items primarily focused on basketball, brought in another 10 percent.
Nike executives also repeatedly emphasized during the call that its revenue forecast was a “much more comprehensive” reflection of its outlook than futures orders, an indicator that Wall Street analysts and investors focused on.
The company stopped issuing futures orders forecast in its earnings release beginning the latest quarter.
Nike forecast full-year revenue to grow in the high single digits, and said currency-neutral futures orders were growing 2 percent.
The company said it expected North America, its biggest market, to continue to grow in second half with return to expanding gross margins and tighter inventory levels.
Sales in North America rose 3 percent to $3.65 billion in the second quarter ended Nov. 30.
Nike’s sales in Greater China rose 12 percent to $1.06 billion in the latest quarter. Excluding the impact of currency changes, sales in the region jumped 17 percent.
However, gross margins contracted 140 basis points to 44.2 percent, due to increased product costs, a strong dollar and higher off-price sales.
The company’s net income rose 7.3 percent to $842 million, or 50 cents per share, in the three months ended Nov. 30.
Analysts on average had expected earnings of 43 cents per share, according to Thomson Reuters I/B/E/S.
Analysts’ average profit estimate had dropped from 52 cents per share in September, according to Thomson Reuters data.
Selling and administrative expenses fell 2 percent to $2.51 billion.
Revenue rose 6.4 percent to $8.18 billion, beating analysts’ average estimate of $8.09 billion.
The stock is the worst performing Dow Jones component this year with a 17 percent drop.
Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sriraj Kalluvila