Nike (NKE) -) shares jumped higher in pre-market trading Friday after the sportswear giant posted stronger-than-expected first quarter earnings and indicated profit margins would improve over the coming months.
Nike said earnings for the three months ending in August came in at 94 cents per share, up a penny from the same period last year but firmly ahead of the Street consensus forecast of an 75 cent profit. Group revenues, Nike said, rose 2% from last year to $12.9 billion, just shy of analysts' estimates of a $12.98 billion tally.
China revenues were also light of forecasts, at $1.74 billion, while north American revenues were down 1.4% from last year to $5.42 billion.
Gross margins impressed, however, and even with narrow 10 basis points to 44.2% they came in half a percent ahead of Street forecasts of 43.7%.
Nike also told investors that margins would expand by around a full percent this quarter thanks to improved markdowns and lower freight costs. The group also held to its full-year forecast for revenues to grow in the mid single-digit range..
“Q1 offered proof of what NIKE can deliver when we connect great innovation, great storytelling and great marketplace experiences to consumers,” said CEO John Donahoe.
“Moving forward, we are laser-focused on scaling these successes with greater consistency and speed as we continue to integrate and streamline our business," he added. "This is how we’ll extend our leadership position and drive growth over the long-term."
Nike shares, a Dow component, were marked 9% higher in early Friday trading to change hands at $97.70 each, a move that would still leave the stock down more than 16% for the year..
"Recovery in the back half remains intact, for now, though growth in North America is likely to remain challenged as we lapse two strong quarters of growth from 2Q/3Q 2023," said KeyBanc Capital Markets analyst Ashely Owens, who carries a 'sector weight' rating on the stock.
"Additionally, we believe that Greater China improvements are to remain muted in the NT due to ongoing foreign exchange headwinds, and though inventory is improving, we remain cautious regarding the timeframe for a return to strong growth," Owens added..
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