China – Footwear company Nike Inc. (NYSE: NKE) has surprised experts by revealing that its first-quarter earnings overcame estimates, helped by higher prices and a lower tax rate, proving that China’s slowdown it’s not necessarily affecting everyone.
Nike recorded a 30% increase in greater China sales for the last three months, coming as a surprise from an economy hitting a rough patch. Greater China sales of $886 million are still just over 10% of Nike’s total $8.4 billion revenue but were easily its fastest growing segment. For the last months, consumer sales trends and confidence indexes in China have been hitting record lows, making global markets raise the red flag.
Chief Executive Officer Mark Parker has expanded the shoemaker’s offerings of women’s apparel and bolstered its online operations. The company also increased its gross profit margin last quarter, with help from higher selling prices, and benefited from broad-based revenue growth. Nike’s shares, already up 19 percent this year, rose 7.5 percent in extended trading after the results, which marked Nike’s ninth straight quarter of better-than-expected profit.
“They’ve had a really nice run. Investments the company has made in cutting production and distribution costs are paying off, and expanding the gross margin has been a big driver of the stock.” said Rob Plaza, an analyst at Key Private Bank to Bloomberg.
China’s economy is heading for its slowest growth in 25 years, causing a headache for firms and investors. But Nike has managed to keep calm and added in a statement that sales in the market had been helped by overhauling its stores, faster online sales and a busy quarter for sporting events in the country, as reported by Reuters.
“The piece that we continue to look at is the brand in China is extremely strong […] we are very mindful of the economic, macroeconomic volatility in the marketplace. I feel very, very good about the business,” said president of brand Trevor Edwards to Forbes.
Source: Forbes