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Nike EPS went up 25 percent

Staff writer |
Nike reported financial results for its fiscal 2015 second quarter ended November 30, 2014. Strong consumer demand drove revenue growth across the portfolio.

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Diluted earnings per share grew faster than revenue, up 25 percent, primarily due to gross margin expansion and a lower average share count, which more than offset higher SG&A investments in Nike, Inc. brands and business capabilities.

Revenues for Nike, Inc. increased 15 percent to $7.4 billion, up 18 percent on a currency neutral basis.

Revenues for the Nike Brand were $7 billion, up 17 percent on a currency neutral basis, with growth in every product type, geography and key category, except Golf.

Revenues for Converse were $434 million, up 24 percent on a currency neutral basis, driven by continuing growth in existing direct distribution markets as well as market conversions in Europe and Asia.

Gross margin increased 120 basis points to 45.1 percent. The increase was primarily attributable to a shift in mix to higher margin products, continued growth in the higher-margin Direct-to-Consumer (DTC) business and a modest benefit from foreign exchange. These positive factors were partially offset by higher product input costs.

Selling and administrative expense increased 17 percent to $2.4 billion. Demand creation expense was $766 million, up 11 percent versus the prior year, driven by marketing support for new product launches, digital brand marketing and consumer events.

Operating overhead expense increased 19 percent to $1.7 billion, reflecting growth in the DTC business, as well as investments in operational infrastructure and digital capabilities and engagement.

Other expense, net was $2 million composed primarily of foreign exchange losses, partially offset by other non-operating items.

For the quarter, the Company estimates the year-over-year change in foreign currency related gains and losses included in other expense, net combined with the impact of changes in currency exchange rates on the translation of foreign currency-denominated profits, decreased pretax income by approximately $39 million.

Net income increased 23 percent to $655 million, while diluted earnings per share increased 25 percent to $0.74, reflecting strong revenue growth, gross margin expansion and a 3 percent decline in the weighted average diluted common shares outstanding.

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