The Beaverton, Ore.-based company said as part of its fiscal second-quarter results that worldwide future orders for Nike brand athletic footwear and apparel scheduled for delivery between December and April 2015 were 7% higher than orders reported a year earlier. Excluding currency changes, orders were up 11% -- the slowest growth pace in four quarters.
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Nike reported fiscal second-quarter net income of $655 million, or 74 cents a share, compared to $534 million a year earlier. Analysts were expecting 70 cents a share. For the quarter ended Nov. 30, revenue rose 15% from last year's quarter to $7.4 billion. Nike attributed the earnings beat to gross margin expansion and a lower average share count that offset higher SG&A investments in Nike brands.
Shares were down 3.6% to $93.56 at last check on Friday. Here's what analysts said.
Christian Buss, Credit Suisse (Outperform; $105 PT)
Nike continues to deliver, with strong demand trends across regions and a return to margin expansion following a two-year period of declining margins. We continue to see opportunity for Nike to sustain low-double digit revenue growth, 40-50bp of operating margin expansion annually, and mid-teens or better earnings growth, making Nike one of the strongest large-cap investment opportunities in the global consumer apparel landscape. We adjust estimates to reflect ramping impact of foreign currency, but maintain our $105 target price.
Nike continues to maintain control of its inventories, with total inventories up 11% Y/Y on 15% sales growth, with Nike Brand wholesale inventories up 9% Y/Y. Unit inventory growth has started to accelerate, however, up 15% versus 12%, 12%, and 7% over the prior three quarters. We will be monitoring inventory controls carefully going forwards, given that control of markdowns and inventory is crucial to our thesis of consistent margin expansion through FY15 into FY16.