Blog: Leonie BarrieNike’s doing it

Leonie Barrie | 21 September 2007

In February, Nike told investors and analysts that it aims to be a $23bn company by the end of fiscal 2011, and its latest set of results seems to put that goal firmly in sight. “The world continues to be a Nike-branded place,” is how one analyst put it.

An expansion of gross profit margins to 44.8% in the first quarter of fiscal 2008, from 44.1% a year earlier, suggests Nike is in track to achieve healthy earnings growth over the next year. And an 11.5% jump in futures orders for its footwear and apparel indicates demand for its products remains strong.

New lines are hitting the mark in regional markets, including the T90 soccer boots which helped increase sales in Europe by 16%. And with sales in the Asia Pacific region soaring by 22%, Nike can be confident of profitable growth in China ahead of the Beijing Olympics in summer 2008.

The US market, however, continues to be the thorn in its side, with revenues up just 2% in the first quarter. The company has until now remained resilient to the slumping sales of athletic shoes which have dented performance at two of its largest customers, Finish Line and Foot Locker. But the question now is will this resilience last?

In a conference call with analysts, Nike’s president and CEO Mark Parker said the fact that others are struggling in the US market creates an opportunity for Nike.

While demand might be down from the mall-based retailers, it sells through enough different retail chains and price points to be shielded from weakness in any one channel. And new retail initiatives like the ‘House of Hoops by Foot Locker’ basketball stores - due to open next spring - will ultimately give it better control over how its products are sold.

Nike Q1 profit surges 51% on strong international sales


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