September 24, 2015 / 8:29 PM / in 3 years

Nike sprints ahead as high-margin products sales rise

(Reuters) - Nike Inc (NKE.N) reported a better-than-expected profit for the ninth straight quarter as the world’s largest sportswear maker sold more products at higher prices and benefited from increased sales in its owned stores and internet business.

A customer exits the Niketown store in midtown Manhattan in New York, in this June 25, 2015 file photo. REUTERS/Brendan McDermid/Files

Shares of the company, already up 19 percent this year, rose 7.5 percent in extended trading after it also posted a better-than-expected rise in “futures orders” growth.

New footwear launches in the basketball, running, and sports categories are helping Nike draw customers toward higher-priced products and its direct-to-consumer (DTC) channel, while the “athleisure” trend is driving sales of athletic apparel.

The push drove a 90 basis-point increase in gross margins to 47.5 percent in the first quarter ended Aug. 31.

The company has also managed to gain traction among younger customers by leveraging social media and its mobile apps.

Investments in product innovation and gathering feedback and data on customers’ fitness activities are also helping Nike get ahead of its rivals, Edward Jones analyst Brian Yarbrough said, calling the first-quarter results “extremely impressive”.

The company’s orders scheduled for delivery from September through January, a gauge of demand it calls “worldwide futures orders”, rose 17 percent, excluding currency changes, at the end of the first quarter.

Analysts on average had expected futures orders growth to slow to 10.3 percent from 13 percent at the end of the fourth quarter, according to Consensus Metrix.

Nike said futures orders grew 27 percent in China, excluding currency changes, versus analysts’ estimates of a 15.8 percent rise.

Revenue from North America, Nike’s largest market, rose 8 percent. Footwear sales, the largest source of revenue, increased 9 percent.

The company said net income rose 23 percent to $1.18 billion, or $1.34 per share, in the quarter, higher than the $1.19 analysts on average had expected.

Revenue rose 5.4 percent to $8.41 billion, also beating the average analyst estimate of $8.22 billion, according to Thomson Reuters I/B/E/S.

Reporting by Ramkumar Iyer in Bengaluru; Editing by Sriraj Kalluvila

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