Extolling a summer full of swoosh-splashed wins, Nike reported quarterly profits and sales well above expectations. And much of it, execs say, is due to the power of its “Unlimited You” brand campaign, which it says earned 480 million online impressions and in excess of 1.1 billion TV impressions around the world. At the same time, futures orders -- a metric that company observers watch closely as an indication of the quarter ahead -- grew by just 5%, sparking concerns among investors.
“It was a summer of amazing sports moments,” says Mark Parker, Nike’s chairman, president and CEO, in a conference call. Led by the basketball domination of NBA champs LeBron James and Kyrie Irving, Serena Williams’ win at Wimbledon, the Olympic Games in Brazil, and Portugal defeating France in an all-Nike final, Parker described it as a summer of “incredible sport. Everywhere you looked in Rio, you could feel Nike’s support. If Nike were a country, we would have stood atop the leaderboard.”
For the first quarter of its fiscal year, revenues rose 8% to $9.1 billion, or 10% in terms of neutral currency. And revenues for the Nike brand climbed 10% to $8.5 billion. (In North America, revenues gained 6%.) It says sales grew in the double-digits in China, Europe, Emerging Markets, and Japan. Sales at Converse rose 4% to $574 million. And net income for the Beaverton, Oregon-based company gained 6% to $1.2 billion.
Nike says sales in performance running hit their highest level ever, fueled by innovations like the new Lunar Epic, the Air Zoom Pegasus, and the Apple Watch Nike +. And sales of its basketball shoes -- a category that observers have been particularly concerned about as rival Under Armour continues to come on strong with its Steph Curry line -- are strengthening.
In a report prior to the earnings release, Deutsche Bank analyst Dave Weiner -- currently rating the company a buy -- wrote that for investors to gain more confidence in the company, they’d like to see “a positive view about the Nike product development engine, and Nike’s North American business reaccelerating and the broader marketplace remaining healthy.”
On the call, Nike execs tried to put the lower-than-expected future orders in perspective. “The brand in North America is terribly strong,” says Trevor Edwards, president of the Nike brand. “Future orders are not a proxy for revenues.”
While futures orders reflect retailer intentions, execs say, they don’t reflect the company’s strengthening direct-to-consumer business, with revenues up 22%, and sales at Nike.com up 49%.
“The stars could not have aligned better. We used the power of sport to energize the marketplace and fuel growth. And as good as these three months have been,” Parker says, “we are more excited about the future.”