Footwear and apparel powerhouse Nike (NKE) posted blowout first-quarter results Thursday evening, and today NKE stock is responding in kind. Nike is up some 10% in early Friday trading, marking fresh all-time highs in the process.
Here’s a quick rundown of everything that went right for Nike in its most recent quarter:
Revenue: Sales jumping 15% as Nike’s Converse brand showed strength overseas and the Nike brand showed “growth in every product type, geography and key category, except Action Sports and Golf.”
Gross Margins: These improved by a full 1.7% as Nike’s product mix was heavy on high-margin products that consumers loved. Gross margin is one of the most vitally important metrics to keep track of with any retailer, because it shows quantitatively the strength of the brand and the pricing power that brand can command.
Net Income: Rose 23% in the quarter, while earnings per share surged 27% to $1.09 per share because Nike bought back 10.6 million shares of NKE stock in the period. Zacks expected EPS to come in at 88 cents, so Nike absolutely crushed expectations.
Western Europe: The region is absolutely head-over-heels in love with Nike. Earnings before interest and taxes in the first quarter rocketed 52% higher, nearly double the growth seen in any other geographic segment. Investors expected the FIFA World Cup to ignite interest in athletic apparel this summer, but not to this degree.
The good news doesn’t stop there. NKE stock was also buoyed by news that online sales surged 70%, a trend that should allow Nike to scale even further and continue to improve its already staggering margins. The football and fitness divisions also performed particularly well, with womenswear also executing at a high level.
This flurry of awesome news prompts the question: What can’t Nike do?
After all Nike is absolutely sticking it to its rivals. Its absurd growth in Western Europe is a slap in Adidas‘ face, because Adidas itself was born and bred in Europe. And perhaps the most significant direct threat to Nike — Baltimore-based Under Armour (UA) — is still reeling from losing a bidding war with Nike that saw NBA superstar Kevin Durant sign a 20-year shoe deal possibly worth $350 million.
Not that Nike has a flawless sponsorship record. In fact, Nike’s roster has a couple of notable blemishes right now — Ray Rice, Adrian Peterson and Oscar Pistorius.
Still, athletes’ bad decisions are outside of Nike’s locus of control.
What is in Nike’s hands — products, marketing, distribution, etc. — Nike has consistently excelled at.
NKE stock is telling that story this morning.
As of this writing John Divine held no positions in any of the stocks mentioned.
