Gross margin expansion and a lower average share count drove diluted earnings per share growth by 25 per cent year on year at Nike for its second fiscal quarter ended November 30, 2014.
In the second quarter of fiscal 2015, net income surged 23 per cent to $655 million, while diluted earnings per share zoomed 25 per cent to $0.74, both from a year earlier quarter.
Strong consumer demand drove revenue growth across the portfolio by 15 per cent from a year ago period to $7.4 billion, while it rose 18 per cent on a currency neutral basis.
Revenues for Nike brand amounted to $7.0 billion in the reporting quarter, up 17 per cent on a currency neutral basis, with growth in every product type, geography and key category, except Golf.
Sales for Converse brand totaled to $434 million, up a massive 24 per cent on a currency neutral basis, driven by continuing growth in existing direct distribution markets as well as market conversions.
In the period under review, gross margin increased 120 basis points year-on-year to 45.1 per cent, which it attributed to a shift in mix to higher margin products and continued growth in DTC business.
Selling and administrative expense grew 17 per cent to $2.4 billion in the second quarter of fiscal 2015, while demand creation expense was $766 million, up 11 per cent versus the prior year quarter.
In the same period, operating overhead expense hiked 19 percent from to $1.7 billion, reflecting growth in the DTC business, as well as investments in operational infrastructure and digital capabilities.
Nike said the effective tax rate for the reporting quarter was 25.4 per cent, a 20 basis point increase, primarily due to adjustments to tax expense on intercompany transactions.
Mark Parker, CEO at Nike said, “The power of our portfolio continues to unlock growth, as we keep a laser focus on our biggest opportunities.”
“The breadth and depth of that portfolio has helped us consistently deliver strong results, quarter after quarter and year after year,” he noted.
Inventories climbed 11 per cent to $4.2 billion, up 11 per cent from November 30, 2013, driven by a 9 per cent increase in Nike brand wholesale inventories and also at Converse and DTC.
Cash and short-term investments were $4.7 billion; $474 million lower than last year from growth in net income and collateral received from counterparties to foreign currency hedging instruments.
During the second quarter, Nike repurchased a total of 5.1 million shares for approximately $425 million as part of the four-year, $8 billion program approved in September 2012.
As of the end of the second quarter, a total of 67.6 million shares had been repurchased under this program for $4.7 billion at an average cost of approximately $68.96 per share. (AR)
