Turnaround in China helps Nike trump forecasts as margins rise

SHARES in Nike surged eight per cent higher in after hours trading last night after it posted better than expected profits and crucially expanding margins.

The sportswear manufacturer said it earned $662m, or 73 cents a share, for the three months to 28 February, compared with $569m, or 61 cents a share last year.

Analysts, on average, had expected earnings of 67 cents a share. Revenue rose nine per cent to $6.2bn.

And the third quarter results indicated Nike’s policy of raising prices on merchandise in a bid to combat higher labour and material costs was finally working.

Gross margin expanded 0.3 percentage points to 44.2 per cent – the first time the firm has grown margin in two years.

Global orders for Nike-branded shoes and clothing scheduled for delivery from March through July 2013, known as futures orders, rose six per cent compared to orders reported for the same period last year.

In North America, the company’s biggest market, orders increased by 11 per cent.

The company also saw a turnaround in future demand in Greater China, with orders rising four per cent, after falling in the previous two quarters.

However, chief executive Mark Parker acknowledged “we still have more to do before we can capture its long-term growth potential”.

Shares rose to $57.93 yesterday in extended trade, after closing at $53.60 on the New York Stock Exchange.