September 25, 2014 / 9:31 PM / 4 years ago

European demand, higher margins drive Nike's profit beat

(Reuters) - Nike Inc (NKE.N), the world’s largest sportswear maker, reported a better-than-expected quarterly profit as it gains market share in Europe and focuses on higher-margin products such as Flyknit soccer boots.

Shoes are displayed at the Nike store in Santa Monica, California, in this file photo taken September 25, 2013. REUTERS/Lucy Nicholson

The company’s shares rose 6.5 percent in extended trading,

Nike said orders for its branded shoes and clothing scheduled for delivery between September and January rose 14 percent in the first quarter, excluding the impact of currency fluctuations.

The company has been giving tough competition to Germany’s Adidas AG (ADSGn.DE), which in July cut its revenue and profit targets for this year.

“When you look around the world, there really isn’t much competition. Adidas is struggling, Reebok is struggling,” Edward Jones analyst Brian Yarbrough told Reuters.

Nike maintained its share of the Western Europe sportswear market at about 12 percent in 2013, while Adidas’s share shrank to 12.6 percent in the year from 13.2 percent in 2012, according to Euromonitor International data.

The soccer World Cup in Brazil in June-July was the first time that Nike sponsored more national teams than Adidas.

More players wore Nike boots than all other brands combined and nearly a third of those players wore Flyknit boots.

Global soccer revenue rose at a double-digit percentage rate in the first quarter, Nike Brand President Trevor Edwards said on a post-earnings conference call on Thursday.

“As of the end of the quarter, we had the leading footwear market share in the nine largest football markets around the world,” he said.

The company said it expects earnings per share to rise at a high teens percentage rate for the second quarter and about 20 percent for the year.

Nike also said it expects gross margin expansion of about 125 basis points for the full year.

The company said gross margin improved to 46.6 percent in the first quarter from 44.9 percent a year earlier.

The company said it reported an 18 percent rise in footwear, its largest and most profitable business.

“There is tremendous energy around the brand in Europe with innovative products that are resonating with consumers. We saw strong results from both performance footwear and apparel as well as in sportswear,” Edwards said.

Revenue from North America rose 12 percent in the quarter ended Aug. 31, while revenue from Western Europe jumped 25 percent, excluding the impact of currency fluctuations.

Revenue from emerging markets rose 10 percent in the quarter.

Net income rose to $962 million, or $1.09 per share, in the first quarter from $779 million, or 86 cents per share, a year earlier.

The rise in net income was also helped by lower tax rate.

Revenue jumped to $7.98 billion from $6.97 billion.

Analysts on average had expected earnings of 88 cents per share, on revenue of $7.83 billion, according to Thomson Reuters I/B/E/S.

Shares of the company have gained more than 15 percent in one year to Thursday’s close of $79.75 on the New York Stock.

Reporting by Devika Krishna Kumar in Bangalore; Editing by Don Sebastian

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