• Q4 net income up 24% to US$865m
  • Gross margin expands 60 bps
  • Sales climb 5% to $7.8bn
Sales for the Nike brand were up 13%

Sales for the Nike brand were up 13%

Sporting giant Nike saw its shares climb in late trading yesterday (25 June) as it upped its full-year sales forecast, revealed fourth-quarter earnings that beat estimates, and an increase in growth of "futures orders".

Net income was up 24% to US$865m, or 98 cents per share, in the three months to the end of May, reflecting strong revenue growth, gross margin expansion, and a lower tax rate. Analysts on average had expected earnings of 83 cents per share, according to Thomson Reuters.

Gross margin expanded 60 basis points to 46.2%, primarily due to higher average selling prices and continued growth in the higher margin Direct to Consumer (DTC) business, partially offset by higher product input and logistics costs.

Fourth-quarter revenues grew 5% to $7.8bn, beating Thomson Reuters analyst expectations of $7.69bn.

Sales for the Nike brand were up 13% to $7.4bn, driven by growth in nearly every geography and key category, except emerging markets and global football. Converse sales climbed 14% to

$435m, driven by market transitions to direct distribution in Austria, Germany and Switzerland, and a strong performance in the US.

As of the end of the quarter, Nike said global futures orders for its namesake brand footwear and apparel scheduled for delivery from June through November totaled $13.5bn, around 2% higher than orders reported for the same period last year.

"Fiscal 2015 was an outstanding year for Nike," said CEO Mark Parker. "Our consistent growth is fuelled by our connection to the consumer and our ability to deliver innovation at an unprecedented pace and scale. At no time in our history has the growth potential been greater for Nike."

For the full year, the company revealed revenue growth of 10% to $30.6bn, and earnings growth of 22% to $3.3bn.

Nike also raised its sales growth forecast for the current fiscal. It now expects sales, excluding currency fluctuations, to grow in the low double-digit percentage range, from a previous forecast of slightly above high single digits.

FBR & Co analyst Susan Anderson, noted: "We believe Nike continues to execute at a very high level, and underlying fundamentals (category offence, mix shift to higher-margin/DTC, international runway) remain strong. While we like Nike's execution, we think shares are reasonably valued at current levels, and we look for a more attractive entry point or an accelerated EPS growth trajectory that better underpins valuation."

Michael Binetti, analyst at UBS Investment Bank, also points to several long-term catalysts likely to help Nike extend its competitive advantage. "New manufacturing technologies coming online over the next few years should offer a significant opportunity to improve Nike's large working capital balance within shorter lead times if production can move closer to end consumers," he notes.