Thursday, December 21, 2006

Nike Reports Second Quarter Earnings

I haven't reported on anyone's earnings in a minute, but I'd be remiss if I didn't register a comment or two on sneaker king Nike, which reported its second quarter earnings yesterday. Here's the gobbledy-gook take on its numbers:

Nike Inc. said Wednesday that sales growth in Asia and a tax agreement with the Dutch government boosted earnings 8 percent in the second quarter for the world's largest athletic shoe and clothing company.

Profits rose to $325.6 million, or $1.28 per share, from $301.1 million, or $1.14 per share, a year ago.

Nike said the tax benefit claimed from the Dutch agreement boosted earnings per share by 13 cents--but even without that benefit, the company beat Wall Street estimates of $1.12 per share.

Sales increased 10 percent to $3.82 billion for the quarter ended Nov. 30, up from $3.47 billion in the same period last year.

"How are we doing? In a word, I'd say good," Nike Chief Executive Mark Parker said in a conference call with analysts.

The other brands owned by the company were doing particularly well, Parker said, especially Converse, with revenue up nearly 50 percent.

He also hinted that Nike is interested in acquiring other companies to invest some of the cash it is building up.

So what's all that mean? Basically Nike had a nice quarter, not fantastic, but nice. It beat Wall Street estimates for both sales and earnings, but it didn't blow the doors out, and that Dutch tax benefit, which came out of left field, probably surprised a lot of analysts and gave Nike's earnings a big boost. Without the tax benefit, Nike would have registered profits of $1.15 per share. That number is still higher than Wall Streets $1.12 per share estimate, but not a ton more.

Converse gave Nike a big boost and my guess is that those sales are being driven by Chuck Taylor sales in Europe and new Dwayne Wade tech basketball shoe business in the states.

What's most interesting is that Nike is sniffing around to buy another company. A lot of folks feel it should have purchased Under Armour a looong time ago, but because that stock is now so expensive, it may be too late for them to grab that golden ring. I've said before that Nike likes to buy smallish brands with solid reputations that are still moldable and have good growth potential. I haven't had my coffee yet and I'm stressed by deadlines so I can't think of one off the top of my head. You got any good guesses? I don't know, how about Sugar Shoes? It might be too small, but it has the potential fill a niche--the women's fashion casual business--that Nike has struggled to address.

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