Nike Q2 ’13 revenues up 7 percent

Nike reported financial results for its fiscal 2013 second quarter ended November 30,

2012 stating that brands propelled double-digit revenue growth on a currency neutral basis, and diluted earnings per share grew faster than revenue due to SG&A leverage, an increase in other income and a lower average share count, which more than offset the impact of a slightly lower gross margin and an increase in the effective tax rate.

Revenues increased 7 percent to 6.0 billion dollars, up 10 percent on a currency-neutral basis. Excluding the impact of changes in foreign currency, Nike Brand revenues rose 11 percent, with growth in all key categories, product types and geographies except Greater China. Revenues for Other Businesses increased 6 percent on a currency-neutral basis, as Converse, Hurley and Nike Golf all increased revenues during the quarter.

“Our strong second quarter results show that our growth strategies are working, even under challenging macroeconomic conditions. We have a focused and flexible portfolio that allows us to target the biggest growth opportunities at all levels – brand, category and product. We stay connected with our consumers and that enables us to deliver innovations that excite the marketplace, grow the business and deliver more value to shareholders,” said Mark Parker, President and CEO, Nike.

Gross margin declined 30 basis points to 42.5 percent. Gross margin benefitted from pricing actions and easing material costs; however, these benefits were more than offset by higher labour costs and unfavourable changes in foreign exchange rates. Additionally, gross margin was negatively impacted by a shift in the mix of the Company’s revenues to lower margin products and businesses.

The Company continually evaluates its existing portfolio of businesses to ensure resources are invested in those businesses that are accretive to the Nike Brand, and represent the largest growth potential and highest returns. On May 31, 2012, the Company announced its intention to divest of the Umbro and Cole Haan businesses, which will allow it to focus resources on driving growth in the NIKE, Jordan, Converse and Hurley brands. On November 30, 2012, the Company completed the sale of certain assets of the Umbro brand to Iconix Brand Group for 225 million dollars. For the second quarter ended November 30, 2012, the Company recorded a loss of 107 million dollars, net of tax, on the sale of these assets, representing the sale price less the value of the Umbro assets sold, the release of the associated cumulative translation adjustment, and other miscellaneous charges, offset by a tax benefit on the loss. This loss is included in the Net Loss from Discontinued Operations.

On November 16, 2012, the Company announced it had reached a definitive agreement to sell Cole Haan to Apax Partners for 570 million dollars. As of November 30, 2012, the Company classified Cole Haan as an asset held-for-sale and included the results of Cole Haan’s operations in the Net Loss from Discontinued Operations. The Company expects to complete the sale of Cole Haan in the third quarter of fiscal 2013, and to record a gain on the sale at that time. For the second fiscal quarter of 2013, the Company’s Net Loss from Discontinued Operations was 137 million dollars. This includes the loss recorded for the sale of the Umbro brand of 107 million dollars, net of tax, in addition to net operating losses and divesture transaction costs for Umbro and Cole Haan during the period, net of tax.