Shares of the athletic apparel, footwear and accessories retailer, Nike Inc. (NKE) reached a new 52-week high of $90.70 on Oct 21, before closing a notch lower at $90.64. The stock has been performing well since the company released its better-than-expected first-quarter fiscal 2015 results along with an encouraging guidance on Sep 25. Shares of Nike have gained nearly 13.7% since and represent a solid year-to-date return of 15.8%.
The sports gear giant, reported earnings of $1.09 per share for the first quarter, which increased 27% year over year and surpassed the Zacks Consensus Estimate of 88 cents by 21 cents.
Results were driven by an impressive top line, improvement in gross margin, lower tax rate and a decline in average share count. The company’s success in the quarter is mainly attributable to the improved sports gear sales during the soccer World Cup and the increasing trend of wearing fitness clothing outside the gym, which contributed to top-line growth.
The company’s top line surged about 15% to $7,982 million and also came ahead of the Zacks Consensus estimate of $7,804 million on the back of robust demand for its brands and significant growth in its main categories and across all of its locations. Sales also jumped 15% on a currency neutral basis.
Following a strong start to fiscal 2015, the company expects the rest of the year to display strength driven by momentum in sales and earnings per share as well as continued investment in growth strategies.
Nike anticipates its constant dollar revenues for the second quarter and fiscal 2015 to grow in the low-double-digits range on the back of strong customer demand in its largest markets and categories, specifically in the direct-to-consumer business. On a reported basis, revenue is expected to grow 1 to 2 points, lower than the projected currency neutral revenue due to a stronger dollar.
The company raised its expectation for second-quarter gross margin, projecting a growth of 125 to 150 bps driven by the progress in its strategies aimed at improving average selling prices as well as continued growth in its high margin businesses, especially in direct-to-consumer. For fiscal 2015, the company now expects gross margin to expand about 125 bps versus 75 bps projected earlier.
Moreover, the company now projects second-quarter earnings per share to grow at a high-teens rate, while it is expected to surge nearly 20% in fiscal 2015. The company’s upbeat earnings forecast is based on continued top-line growth and gross margin expansion, offset by increased investments in its largest growth drivers.
Nike’s solid quarterly performance reflects its concentration on adopting innovations to keep up with its customers. In spite of macroeconomic headwinds, the company’s results remain impressive, backed by its continuous focus on exploiting growth opportunities along with efficient risk management. Going forward, this Zacks Rank #1 (Strong Buy) company plans to follow these standards in order to enhance shareholder value in the long run.
Apart from Nike, Nordstrom Inc. (JWN), L Brands Inc. (LB) and The Clorox Company (CLX) also hit 52-week highs of $71.75, $70.80 and $99.60, respectively, on Oct 21, 2014.
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