Powered by strength in North America, China and Emerging Markets, Nike Inc.’s fiscal fourth quarter revenues jumped 13.6 percent to $5.8 billion and would have been up 11 percent excluding currency changes.


Net earnings rose 13.9 percent to $594 million, or $1.24 a share. Most encouragingly, Nike Brand futures orders were up 15 percent at quarter-end, or 12 percent excluding currency changes.

 

Results easily exceeded expectations. Analysts had expected the company to report earnings of $1.16 a share on revenue of $5.53 billion.


Excluding the impact of changes in foreign currency, Nike Brand revenues rose 12 percent for the three-month fiscal period ended May 31, driven by growth in all geographies except Japan and Central and Eastern Europe. By category, revenues were up on a currency-neutral basis in all key categories except Football (Soccer), which faced challenging comparisons due to last year’s World Cup. Reported Nike brand revenues advanced 14.8 percent to $5 billion. EBIT for the Nike Brand grew 13.0 percent to $898 million.


Total Nike brand Footwear revenues grew 18.6 percent to $3.23 billion in fiscal Q4; apparel advanced 8.4 percent to $1.44 billion; and equipment rose 4.6 percent to $271 million. On a currency-neutral basis, sales grew 16 percent in footwear, 5 percent in apparel, and 2 percent in equipment.


Revenues for Other Businesses increased 6.3 percent to $760 million in the fiscal fourth quarter, with a 1 percentage point benefit from changes in currency-exchange rates. For the quarter, growth in Converse, Cole Haan and Hurley more than offset lower revenues at Umbro and Nike Golf.


Gross margin declined 310 basis points to 44.3 percent of sales, primarily driven by higher product input costs like labor and raw materials. Other factors contributing to this decline include elevated freight costs (including airfreight to meet strong demand for select Nike brand products), higher inventory obsolescence reserves and higher royalty expenses related to sales of endorsed team products. These factors more than offset the positive impact of growing sales in the companys Direct-to-Consumer operations and ongoing product cost reduction initiatives.


Fiscal fourth quarter selling and administrative expenses grew at a slower rate than revenue, up 2.0 percent to $1.8 billion. Demand creation expenses were $617 million, down 7 percent from higher prior-year spending in support of the World Cup. Operating overhead expenses increased 8 percent to $1.2 billion due to additional investments in the Direct-to-Consumer business and low-single-digit growth in core operating overhead.


In North America, Nike brand revenues increased 21.5 percent to $2.1 billion in Q4, with a 1 percentage point benefit from changes in currency exchange rates. Revenues were higher on a currency-neutral basis in all key categories except Football (Soccer), The strongest growth came from Running, Men’s Training, Sportswear, Basketball and Women’s Training, which were all up at a double-digit rate for the quarter. Footwear and Apparel revenues, up 19.6 percent and 27.7 percent, respectively, were driven by strong category presentations, improved product lines and earlier shipments of summer season product. Nike brand futures in the North America region were up 14 percent at quarter-end.


The regions Direct-to-Consumer sales were up 23 percent for the period, driven by an 18 percent improvement in same-store sales and 31 percent growth in online sales.


Fiscal fourth quarter earnings before interest and taxes (EBIT) in the North America region grew 20.3 percent to $522 million as revenue growth and leverage of selling and administrative expenses more than offset a lower gross margin rate for the period.


In Western Europe, fiscal fourth quarter revenues grew 5.0 percent to $1.0 billion, with 4 percentage points of benefit from changes in currency exchange rates. On a constant currency basis, revenues grew in every territory except France and Northern Europe. By category, currency-neutral revenue growth in Running, Basketball, Men’s Training and Women’s Training was mostly offset by lower revenues in Sportswear and Action Sports. Football (Soccer) revenues were flat for the quarter.  Future orders were up 11 percent overall and 1 percent on a currency-neutral basis at quarter-end.


Fourth quarter EBIT for Western Europe declined 27.5 percent to $140 million as revenue growth and lower selling and administrative expenses were more than offset by significantly lower gross margin due to unfavorable changes in currency exchange rates in addition to the factors which affected the company’s overall gross margin.


In Central and Eastern Europe, sales increased 1.0 percent to $294 million, but were down 1 percent on a currency-neutral basis as higher revenues in Russia were offset by declines in most other territories. By category, currency-neutral double-digit revenue growth in Running, Basketball and Action Sports was more than offset by declines in other key categories, primarily Sportswear and Football (Soccer). Futures were up 13 percent overall and 10 percent currency-neutral.


EBIT for Central and Eastern Europe decreased 14.8 percent to $69 million, driven by lower gross margin and higher selling and administrative expenses.


Revenues in Greater China increased 21.3 percent to $564 million for the fiscal fourth quarter, up 16 percent excluding the impact of changes in currency exchange rates driven by expanding points of distribution and comp store sales increases. Revenues were higher on a currency-neutral basis in all key categories except Football (Soccer) and Women’s Training. The strongest growth came from Running, Sportswear, Men’s Training and Action Sports, which were all up at double-digit rates for the quarter. China’s futures were up 24 percent overall at quarter-end and 17 percent currency-neutral.


EBIT for Greater China was up 20.9 percent to $226 million driven by revenue growth and leverage of selling and administrative expense which more than offset a lower gross margin rate.
Japan’s fourth quarter revenues declined 17.2 percent to $216 million, down 26 percent excluding the impact of changes in currency exchange rates. Although revenues declined for most key categories, Running posted solid growth for the quarter. Nike noted that challenging macroeconomic conditions and the March earthquake and tsunami weighed on results.


Japan’s fiscal fourth quarter EBIT was down 66.7 percent to $20 million as result of lower revenues, gross margin declines and higher selling and administrative expenses. Futures were down 13 percent overall at quarter-end, or down 6 percent in currency-neutral terms.


Fiscal fourth quarter revenues in the Emerging Markets geography were up 25.1 percent to $747 million, with 6 points of benefit from changes in currency exchange rates. Currency-neutral revenues were higher in nearly all key categories and territories, led by Argentina, Brazil, Korea and Mexico, which were all up at a double-digit rate for the quarter.


Emerging Markets EBIT for the quarter grew at a faster rate than revenue, up 68.4 percent to $197 million due to stronger gross margins (as a result of positive changes in foreign exchange rates), leverage of selling and administrative expense and favorable impacts from foreign currency translation. Futures were up 25 percent overall and ahead 23 percent currency-neutral for the period.


In the Other Businesses segment, double-digit growth at Converse, Cole Haan and Hurley helped drive the 5 percent currency-neutral gain for the fiscal fourth quarter. That more than offset declines at Umbro, which faced tough comparisons to World Cup-related  revenues generated last year; and Nike Golf, which experienced significant declines in Japan. Fourth quarter EBIT for the Other Businesses segment increased 12.5 percent to $81 million due to revenue growth and gross margin expansion.


Overall Nike, Inc. inventories at quarter-end were $2.7 billion, up 33 percent from unusually low levels at the end of the prior-year quarter. Nike brand unit inventories were higher as a result of strong demand, growth in replenishment programs for high-turnover styles, early deliveries of key seasonal items with longer production lead times and the growth of Direct-to-Consumer operations. Changes in currency exchange rates and higher product costs also contributed to the increase in dollar inventories at year-end.


>>> NKE shares rose more than 4 percent in after-hours trading and should get a nice bump this morning ahead of the companys investor meeting…A miss by analysts of nearly $300 billion on the top-line and 8 cents on the bottom line will do that