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Various factors help Nike's Q1FY16 diluted EPS surge 23%
Sep '15
Driven by gross margin expansion, S&A expense leverage and a lower effective tax rate, diluted earnings per share surged 23 per cent year over year at Nike Inc in the first fiscal quarter ended August 31, 2015.

In a press release, Nike said its diluted earnings per share soared 23 per cent from a fiscal ago period to $1.34, reflecting strong revenue growth, gross margin expansion, S&A expense leverage and a lower tax rate.

Revenues of the company however rose slower at 5 per cent over the first quarter of fiscal 2015 to $8.4 billion, but up 14 per cent on a currency-neutral basis.

In the first quarter of fiscal 2016, sales for the Nike brand totaled $7.9 billion, up 15 per cent on a currency-neutral basis driven by growth in every geography and nearly every key category.

Revenues for Converse were $555 million, a growth of 3 per cent on a currency-neutral basis, mainly driven by strong growth in the United States, partially offset by a decline in the United Kingdom.

For the quarter under review, gross margin expanded 90 basis points to 47.5 per cent, which it attributed to higher average selling prices and continued growth in the Direct to Consumer (DTC) business.

Nike also added that S&A increased 4 per cent over the first quarter of prior fiscal to $2.6 billion, while demand creation expense was down 7 per cent at $832 million.

“This reflects favourable comparisons against higher investment in support of the World Cup in the first quarter of fiscal 2015,” the sports goods marketer stated.

Operating overhead expense increased 10 per cent year on year to $1.7 billion in the reporting quarter, reflecting continued growth in the DTC business and targeted investments in consumer-focused digital capabilities.

Other income comprised primarily of net foreign currency exchange gains amounted to $31 million.

The effective tax rate for the first quarter of fiscal 2016 stood at 18.4 per cent, compared to 21.7 per cent for the same period last fiscal.

“This was primarily due to an increase in the proportion of earnings from operations outside of the US, which are generally subject to a lower tax rate, as well as certain non-recurring items,” it explained.

CEO Mark Parker said, “Our relentless pace of growth is driven by our proven strategy of putting the consumer first, obsessing innovation in everything we do and leveraging our powerful portfolio.”

“We are well-positioned to continue to deliver long-term growth that is both sustainable and profitable,” he observed. (AR)

Fibre2Fashion News Desk – India

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