Nike Shares Rise After Surprisingly Strong Earnings Report
Nike shares rose about 4 percent Wednesday, a day after posting higher earnings for the fourth quarter and surprisingly strong future orders.
With growth in the U.S. and abroad, Nike buoyed hopes for some investors about the future of the world's largest athletic shoe and clothing maker.
Nike shares rose $2.20, or 4.1 percent, to $56.02 in morning trading.
After the markets closed Tuesday, Nike reported fourth-quarter net income jumped 32 percent to $437.9 million, or 86 cents per share, meeting the average expectation of analysts surveyed by Thomson Financial. Revenue for the quarter increased 9 percent to $4.4 billion.
"It seems like the company has overcome a few obstacles," said John Shanley, an analyst with Susquehanna Financial Group.
The Beaverton-based company streamlined a number of operational issues, such as dramatically cutting its inventory growth to 2 percent after posting double-digit increases for several quarters. It also saw the revenue of its six subsidiaries grow 16 percent for the year, including the greatest global sales gain for Converse to date at 23 percent for the quarter.
But the biggest surprise seemed to be from Nike's announcement that future orders worldwide grew 12 percent for the quarter, boding well for the company's future. One analyst called it a "blowout."
"Nike is a growth company, and fiscal year 2007 was no exception," said Mark Parker, Nike's chief executive officer. "We delivered another record year of revenue, earnings and cash flow."
The company saw revenue jump in Europe by 12 percent, due in part to favorable currency exchanges. Nike executives said it saw stabilizing markets in France and the United Kingdom, where it has struggled for some time.
Nike reported revenue growth of 7 percent in Asia, largely because of growth in China. And revenues were flat in the Americas.
But the company did have to soothe fears over its domestic market, which has been facing an uncertain future. Some analysts were disappointed in the company's slowed U.S. growth last quarter, and its major mall and chain retailers, such as Foot Locker and Finish Line, have had sluggish sales amid a weaker housing market and volatility in gasoline prices.
In the fourth quarter, sales rose 10 percent to $1.6 billion in the U.S. market, the company's largest. But Nike would not disclose which channels saw the best growth.
The company said it remains focused on diversifying its retail business in the future, such as its recent announcement to open House of Hoop specialty basketball stores with Foot Locker and its own independent sites in the future.
"All their businesses performed really well," said Sara Hasan, an analyst with McAdams Wright Ragen in Seattle.
Nike officials said the company is on target to meet its goal of $23 billion in sales by 2011.
Don Blair, Nike's chief financial officer, said the company expects to deliver high single-digit revenue growth, mid-teens earnings per share growth and improved returns on invested capital.
For the fiscal year, the company reported net income of $1.5 billion, or $2.93 per share, up from $1.4 billion, or $2.64 per share in the prior year. Sales rose 9 percent to a record $16.3 billion for the year.
Currency-exchange rate changes helped boost sales by 2 percentage points for the year and the quarter, the company said.