• Earnings climb 20% to US$950m
  • Gross margin flat at 45.9%
  • Sales grow 8% to $8.03bn
Nike saw higher earnings and sales in the third quarter

Nike saw higher earnings and sales in the third quarter

Nike's global execution remains outstanding, one analyst has said, as the US sporting goods giant revealed "robust and balanced" growth across its portfolio in the third quarter. 

Earnings reached US$950m in the three months ended 29 February, a 20% increase on $791m in the prior year thanks to net foreign currency exchange gains.

Gross margin remained flat at 45.9%, beating estimates of a 50 basis point contraction, and benefiting from higher average selling prices and continued growth in the direct to consumer (DTC) business. This offset the impact of clearing excess inventory in North America, forex headwinds and higher warehousing costs. 

Group sales were up 8% to $8.03bn, and for the Nike brand grew 15% to $7.6bn driven by gains in every geography and nearly all key categories.

Revenues for Converse, however, were down 5% to $489m on a currency neutral basis, primarily due to a major system go-live that accelerated orders from the fourth quarter to the third in the prior year.

Greater China saw the highest growth at 23%, while North America sales were up 13%. In Western Europe revenues edged up 2%. 

At the end of the quarter, worldwide futures orders for Nike brand athletic footwear and apparel scheduled for delivery from March through to July were 12% higher than in the same period last year.

"In the third quarter, Nike delivered robust and balanced growth across our expansive, powerful portfolio," said CEO Mark Parker. "We grow by serving the athlete personally every day and, as we unveiled last week, through breakthrough innovation that gives us a foundation for growth for years to come. Combined with our strategic investments, world-class execution and financial discipline, Nike consistently delivers value to our shareholders."

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For the fourth quarter, Nike is forecasting sales growth in the mid-single-digits, compared to the consensus estimate of +9%. Gross margin is guided to flat to slightly expanding. For fiscal 2017, constant currency sales growth is expected at a high single to low double-digit rate, and EPS to increase at a low teens rate.

Cowen & Co analyst, John Kernan, notes: "Nike's global execution remains outstanding, which is reflected in the heavily weighted consensus long position from both the buy and sell side. We reiterate our $70 price target, but view Q4 guide and initial outlook for 2017 as near-term overhangs towards the stock's inevitable longer-term move higher, as we model earnings potential north of $4 (mid-teen CAGR)."