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Demand for Nike brand still strong

Jun 28 2011 06:57 Reuters

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New York - Nike Inc reported stronger-than-expected quarterly earnings on Monday as a 14% increase in revenue helped offset higher costs, and orders showed surprising strength for the future.

Nike shares gained 4.3% to $84.14 in after-hours trading.

The sports gear maker said net income for its fiscal fourth quarter, ended May 31, rose 14% to $594m, or $1.24 a share. Net income for the year ago period was $522m, or $1.06 a share.

Nike was expected to earn $1.16 a share, according to the average estimate of analysts surveyed by Thomson Reuters.

Apparel retailers are struggling with higher material, labor and freight costs. But Nike was able to fend off such pressure because demand for its brand was so strong during the quarter, according to Matt Arnold, an analyst at Edward Jones.

Revenue for the quarter rose to $5.8bn from $5.08bn. Excluding currency movements, it increased 11%.

Analysts expected $5.528bn of revenue for the period.

"The best way to offset higher costs is to generate strong demand growth and Nike was able to do that," Arnold said.

Futures orders, a closely watched measure of demand in coming months, came in ahead of Wall Street estimates. Orders for June through November jumped 15% to $10.3bn. Excluding currency effects, orders rose 12%, Nike said.

Barclays Capital analyst Robert Drbul expected futures orders to be up 8% to 10% in constant dollars. Arnold, the analyst at Edward Jones, was expecting future orders to be up at least 8%.

Strong futures orders suggest Nike will be able to raise prices later this year, Arnold added.

Fourth-quarter revenue generated from Nike brands jumped 22% to $2.1bn in North America, the company reported. The strongest growth came from running shoes, men's training gear, sportswear, basketball and women's training, which were all up at least 10% in the period.

Footwear sales were up 20%, while apparel revenue rose 28%, "driven by strong category presentations, improved product lines and earlier shipments of summer season product," Nike said in a statement.

Sales were partly driven by Nike Free, a new line of shoe that mimics barefoot running, Arnold said.

Nike also highlighted its direct-to-consumer business, which includes online sales. Sales were up 23% in this segment, with online sales rising 31%, the company reported.
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