After six consecutive quarters of decline, Nike surpassed Wall Street expectations by reporting a profit of $1.45 billion in Q1.
The boost put the fitness apparel giant at 94 cents profit per share, beating analysts’ projections of 75 cents per share.
Noting that Nike has “pricing power,” David Swartz, a senior equity analyst at Morningstar, said the latest figures mean the company “will be able to avoid really severe discounting compared to some others this [holiday season]. It’s in better shape,” according to Reuters.
Such pricing power saw the company reap $12.94 billion in total revenue, thanks in large part to the high cost of its popular sneaker brands.
“Q1 offered proof of what NIKE can deliver when we connect great innovation, great storytelling, and great marketplace experiences to consumers,” said Nike President and CEO John Donahoe in a statement.
It also managed to whittle down its inventory glut by 10%, boosting confidence among investors and sending its shares upward by about 8% in extended trading after the announcement on September 28.
Moreover, Nike executives are optimistic that the sales of their iconic sneakers and apparel will propel figures next quarter as well.
“We expect second-quarter gross margins to expand approximately 100 basis points versus the prior year, reflecting benefits from strategic pricing, improved markdowns, and lower ocean freight rates, partially offset by higher product input costs,” said Nike CFO Matt Friend in a conference call with investors.
The company has not been resting on its laurels. It is facing stiffer competition from other sneaker brands, such as Deckers and Salomon, and waning customer demand.
Friend said the company’s strategy would be to capitalize on the growing demand for high-performance running shoes.
“[We] will build on the consumer momentum around running and modern comfort with performance and lifestyle franchises such as Infinity, Motiva, Invincible, Vomero 5, V2K, and the Air Max 1,” he explained during the call.
Moreover, he said Nike will look to update its basketball sneaker offerings, including the relaunched Kobe brand and the latest installment of Nike Air innovation, which will featured at the upcoming Olympic Games in Paris.