(Boursier.com) — Nike reassures. The US sporting goods giant showed strong quarterly results yesterday on Wall Street while raising its full-year guidance as robust demand for its sneakers and sportswear in North America and Europe helped offset a slump in sales in China, its most profitable market. In its second fiscal quarter, the Oregon-based firm posted a net profit of 1.3 billion dollars, stable over one year, or an EPS of 85 cents, against 65 cents expected by analysts.
Global sales increased by 17% to $13.3 billion (+27% at constant exchange rates), against a consensus of $12.6 billion. Revenues exceeded expectations in all regions except China. Although down 300 basis points at 42.9%, gross margin, a key indicator of profitability, also beat expectations, and executives said year-end performance was strong.
The company’s margins were hurt by the stronger dollar, higher freight and logistics costs, and higher markdowns to eliminate excess inventory. The latter have further progressed over the quarter. “We believe the peak in inventory is behind us because the actions we are taking in the market are working,” Nike Chief Executive John Donahoe said on the earnings conference call, however.
Nike increased its marketing spend in an effort to attract more customers. Demand creation spending rose 8% in the quarter to $1.1 billion, mainly due to an increase in advertising.
“Our momentum for the holiday season continued through the first weeks of December, despite operating in a largely promotional market,” Chief Financial Officer Matt Friend said.
For the full fiscal year, which ends in mid-2023, Nike now expects growth of 10-15%, excluding currency effects. The company reiterated its projection that gross margin will decline by 200 to 250 basis points.
The title jumped more than 12% in post-session yesterday in New York.