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Nike Profit Rises 7%

Nike Profit Rises 7%
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3/22/2012 5:27 PM ET

Nike Inc. (NKE: Quote), the world's largest maker of athletic shoes and apparel, said Thursday after the markets closed that its third quarter profit rose 7% from last year, as higher sales and better expense management more than offset the impact of a lower gross margin and a higher effective tax rate. The company's quarterly earnings per share also came in above analysts' expectations.

Nike shares are gaining 0.9% in after hours trading after closing the day's regular trading session at $110.99, up 55 cents.

The company has managed to increase sales in North America, China and emerging markets in recent quarters, but its gross margin continues to be hurt by higher product costs.

Third quarter revenue from North America, the company's largest market, increased 17% year-over-year to $2.1 billion, while revenue for Western Europe grew 4% to $962 million and Central and Eastern Europe revenue rose 9% to $275 million.

Revenue for Greater China surged 25% to $694 million in the third quarter, while Japan revenue grew just 3% to $201 million. Third quarter revenue from emerging markets climbed 23% to $793 million. Revenue from the company's other businesses, which includes Cole Haan, Converse Inc., Hurley International LLC, Nke Golf, and Umbro Ltd., increased 12% to $753 million in the third quarter.

Gross margins for the quarter fell to 43.8% from 45.8% a year ago, due mainly to higher product costs, growing sales in the company's direct to consumer operations and ongoing product cost reduction initiatives.

For the third quarter ended February 29, 2012, the Beaverton, Oregon-based company reported net income of $560 million or $1.20 per share, compared to $523 million or $1.08 per share for the year-ago quarter.

On average, 19 analysts polled by Thomson Reuters expected the company to earn $1.17 per share for the third quarter.

Revenues for the third quarter rose 15% to $5.85 billion from $5.08 billion in the same quarter last year. Excluding changes in currency exchange rates, third quarter revenues grew 16% from a year earlier. Seventeen analysts had a consensus revenue estimate of $5.82 billion for the third quarter.

For the third quarter, footwear sales rose 17% to $3.3 billion, while apparel sales increased 12% to $1.5 billion and equipment sales grew 14% to $267 million.

Worldwide future orders for Nike brand athletic footwear and apparel, scheduled for delivery from March through July 2012, rose 15% from last year to $9.4 billion.

Mark Parker, Nike President and CEO, said, "The environment remains volatile, but I'm optimistic about the future. We're starting a great season of major sports events and we have a pipeline full of innovation to fuel growth over the long term."

Parker's statement obviously referred to the 2012 London Olympic games to be staged in July later this year. During the third quarter, Nike repurchased 2.5 million shares of its common stock for about $239 million as part of its four-year, $5 billion share repurchase program, approved by the Board of Directors in September 2008. As of the end of the third quarter, a total of 48.1 million shares were repurchased for about $3.9 billion under that program.

Among others in the industry, Germany-based Adidas AG (ADDDF.PK ,ADDYY.PK) earlier this month reported an 157% growth in fourth quarter profit, as revenue increased and expenses fell.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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