Nike 2Q results - Still doing it

Last night after the close we received second quarter results from Nike. An odd time to release results but it certainly kept us busy and excited in the quiet office. Lets delve into the numbers straight away.

Revenues increased 15 percent to $7.4bn while headline earnings increased 25 percent. This was thanks to increasing margins (they pushed their high margin products successfully) and share buy backs. The group was very proud to announce solid growth in all geographic regions while Converse grew sales 24% to $434 million (6.2% of sales). The only disappointment was golf where sales were flat. This has been an ongoing trend for a while now, Golf has slowed down in general. It is not a Nike issue.

Below I have hacked a divisional break up of their revenues to paint a better picture of where Nike sell their goods and what they are selling. As you can see, very solid growth in the developed markets, no wonder we have seen money shifting back in that direction. Footwear is still dominant whether it be for fashion or sport. Their are Nike fashion shoes which sell for over 1 thousand British Pounds!



But the sporting aspect excites me the most. Being a recent runner myself I now read and follow running media. I came across this article in the RunnersWorld titled The Half Marathon's amazing growth in 3 charts. I am going to hack a couple of images from the article.




As you can see, phenomenal growth regardless of macro trends. And that second image which shows the dominance in women runners is very interesting and encouraging. Whether it be indoor soccer, running, touch rugby, cross fit or pushing weights, people are getting more active and Nike are the brand leaders.

The market of course knows this. The share trades at $94.27 (it's down 2.5% on the back of lower than expected future orders) and is expected to make $3.61 this year and $4.16 next year. Year end is May. Trading at 23 times next years earnings the stock is priced for growth. But if a company is growing earnings between 15 and 20 percent then that is to be expected.

We are of the opinion that sales will exceed high expectations. The take up of sport and activity is contagious and if your peers are all doing it, its very hard to not get involved. The Nike brand has never been stronger and the shift in Nike apparel as a fashion statement is also very exciting. We are adding to this stock.