Nike Earnings Leap Ahead

When it comes to growth, Nike (NYSE: NKE) can repeatedly just do it.
The athletic apparel giant reported better-than-expected fiscal fourth-quarter earnings Thursday, with growth across all of its geographic segments.
Revenue rose 13% to $7.78 billion, excluding the effects of foreign currency translations. That beat analyst expectations, which called for $7.69 billion, according to analysts polled by Bloomberg.
For the entire fiscal year, revenue grew 10% and reached $30 billion, which is hugely impressive considering Nike only topped $20 billion in annual sales just four years ago. Furthermore, Nike earnings per share soared 26% in the fourth quarter and 25% for the full year, to $3.70 per share.
Equally impressive was the success Nike is having across the globe. Revenue excluding currency effects jumped 20% in China, 19% in Japan and 17% in Western Europe. This is remarkable, considering that the macroeconomic challenges in these areas of the world are preventing many other companies from penetrating these markets effectively.

The Nike Evolution

One reason Nike continues to excel is because it’s constantly evolving. Last year, it rolled out the KOBE 9 Elite, its first basketball shoe with Nike’s Flyknit technology, which according to the company creates a “featherweight, formfitting and virtually seamless upper.”
Another area contributing to Nike’s growth is its expanding line of women’s apparel. In the previous fiscal year, Nike’s women’s business actually grew faster than its men’s business. The women’s segment grew 20% last year, and is now a $6 billion business.
Clearly, Nike is resonating with women. It is leveraging its world-class brand through key product lines such as the Nike Pro Bra Collection and broad assortments of tights to connect strongly with consumers.
Another main factor behind Nike’s strong growth is its booming e-commerce presence. Its e-commerce business surpassed $1 billion in revenue this past year. Nike.com delivered 51% revenue growth in the fourth quarter and 55% growth for the full year. It benefited from both increases in traffic and conversion.
Going forward, there is plenty of room for continued growth in e-commerce. Nike calculates that global consumer spending through e-commerce exceeds $1 trillion, and a lot of that is performed on mobile devices. This is an important development, because Nike experienced greater traffic on Nike.com through mobile devices than on desktops last year. With such a huge market, it’s obvious that there remains a tremendous opportunity ahead for the company.

Future Outlook

Looking ahead, it’s very likely Nike will have another hugely successful year in fiscal 2016. Its worldwide futures orders are a key metric that helps gauge future demand. Fortunately, these orders rose 13% in the first quarter, excluding currency effects. This implies that the company is still seeing strong demand, which should lead to strong sales growth in the current year.
With its tremendous cash flow, Nike aggressively returns a lot of that cash to shareholders. The company utilized $678 million of cash to buy back stock just last quarter. It’s in the process of an $8 billion share buyback authorization expected to last through 2016. Clearly, these buybacks have created value, as the company has spent $6 billion on share repurchases since 2012, at an average cost of just $73 per share.
Nike also pays a 1.1% dividend, which the company grows at high rates each year. For example, it increased its dividend by 16% last year.
It looks like clear sailing for Nike. The company is firing on all cylinders, both in terms of product innovations and geographic markets. Its revenue and profit are growing strongly, and with budding women’s and e-commerce businesses, there’s plenty of growth left on the horizon for Nike.

Worry-free riches

They’re owned by some of the wealthiest people on the planet. They share a few key similarities that distinguish them from 99% of equities. Even as the S&P keeps breaking record highs, they’re still crushing it. In fact, over the last 10 years they’ve outpaced it by a colossal 390%. Find out more right here.