Nike Beats, but Margins and Costs Worry

Nike Inc. (NYSE: NKE) reported fiscal first quarter 2013 diluted earnings per share (EPS) of $1.23 on revenue of $6.67 billion. In the same period a year ago, the sporting goods maker reported diluted EPS of $1.36 on revenue of $6.08 billion. First-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.12 and $6.41 billion in revenue.

The company also said that pro-forma EPS, excluding the results of two recent divestments, would have totaled $1.27.

Nike’s president/CEO said:

We had a strong first quarter and a great start to the fiscal year. NIKE, Inc. delivered an amazing array of innovation across some of the biggest moments in sport. We’ll continue to make strategic investments across our portfolio of businesses to capture our full potential over the long term and drive shareholder value.

The company did not offer guidance, but did say that worldwide future orders at the end of the first quarter for delivery between September 2012 and January 2013 totaled $8.9 billion, up 6% from the same period a year ago. Ignoring the currency exchange rate, orders are up 8%.

Gross margins fell by 80 basis points to 43.5%, benefiting from “pricing actions and product cost reduction initiatives, however, this was more than offset by higher input costs, primarily materials and labor.” Selling and administrative expenses also rose at a faster clip than revenue, much of the increase due to advertising during the Olympic Games and the European Football Championships.

Nike announced a new 4-year, $8 billion share repurchase program last week. The company’s previous 4-year, $5 billion buyback program ended during the current quarter.

Nike’s shares are down about 3.8% in after-hours trading, at $92.25, after closing today at $96.00. The 52-week range is $81.01 to $114.81. Thomson Reuters had a consensus analyst price target of $106.07 before today’s report.

Paul Ausick