• Q2 earnings grow 7% to US$842m
  • Gross margin up 140 bps
  • Revenue increases 6% to $8.2bn
Nike saw stronger demand in China and its domestic market in Q2

Nike saw stronger demand in China and its domestic market in Q2

US sporting giant Nike has booked higher second-quarter earnings on stronger demand in China and its domestic market, while indicating a potential rebound in its basketball business.

Net income in the three months to the end of November grew 7% to US$842m from $785m a year earlier, reflecting revenue growth, partially offset by lower gross margin, which contracted 140 basis points to 44.2%. This was primarily due to higher average selling prices more than offsetting higher product costs, unfavourable changes in foreign exchange rates and the impact of higher off-price sales.

Total revenues increased 6% to $8.2bn, up 8% on a currency neutral basis. Sales for the Nike brand grew 8% to $7.7bn, driven by double-digit currency neutral growth in Western Europe, Greater China and the emerging markets as well as the sportswear and running categories.

Sales for Converse, meanwhile, were up 5% to $416m, driven by strong growth in North America.

Nike's basketball business has come under pressure recently, particularly from rival Under Armour's NBA-star Stephen Curry's signature shoe line. The company, however, has said it expects the category to return to growth in the back half of the year.

In the group's North America business, sales edged up 3% to $3.65bn, while Western Europe sales grew 7% to $1.38bn. Greater China sales, meanwhile, were up 12% to $1.05bn.

"Nike's ability to attack the opportunities that consistently drive growth over the near and long term is what sets us apart," says Nike CEO Mark Parker. "With industry-defining innovation platforms, highly anticipated signature basketball styles and more personalised retail experiences on the horizon, we are well-positioned to carry our momentum into the back half of the fiscal year and beyond."

FBR & Co analyst Susan Anderson, notes: "We like Nike's innovation pipeline, international runway, and long-term margin catalysts, but we remain on the sidelines and look for improved revenue growth, margin execution, and lower inventory growth."