Nike with a comfortable beat on their Q4 (and FY) results

Nike shoes reported numbers last evening, and unlike last time it was a handsome beat. A fairly handsome beat, the stock was up over four percent in the aftermarket and crested 85 Dollars a share, and stayed there, currently 85.27 Dollars. Up 4.47 percent. OK, so obviously Mr. Market telling us that they like it. 124 US cents of earnings for the quarter, which was around 8 cents better than where the street pegged the number. On the Nike investors relations website they are at pains to point out that they are a growth company. I know that. But if you are stuck in America and the consumer is this and that, then you can be forgiven for feeling a bit beat up.

Perhaps you should rather have a look at this sales mix from the release: NIKE, Inc. Reports Fiscal 2011 Fourth Quarter and Full Year Results, and pay attention to the reported future orders bit. Emerging markets up 25 percent, Greater China up 24 percent, versus Western Europe which is up 11 percent and North America which is up 14 percent. Understandably Japanese demand has been weak, and future orders in that geography is down 13 percent. Overall, future orders are up 15 percent. And so, even though in the words of the Nouriel, things feel so bad, they are so bad in North America that future Nike orders are up 14 percent. Come on people.

Margins, margins, margins. Higher production costs ate into those high margins, which fell 310 basis points to a still astonishing 44.3 percent gross. Higher costs on the transport side too need to be passed onto you and I. I bought a Nike running top the other day, and got one for my wife too, they were on sale, I know, cheapskate, but that is the way that I roll. They do not mention Barcelona FC's magnificent win in the champions league, but do note that football (or soccer as the Americans call it) shirt sales were one category that was lower, for obvious reasons, there was a World Cup last year.

It is still all about the shoes, but the apparel division is growing fast. For the full year the company reported group sales of 20.862 billion Dollars, footwear contributed 11.493 billion and apparel contributed 5.475 billion USD. Equipment (that does include Nike cricket bats would you believe) is just over 1 billion USD. So then, where is the rest of the revenue mix? Turns out, other businesses contribute 2.747 billion Dollars. These other businesses segment include Umbro, Converse, Cole Haan and Hurley. Some you might know well, some you might not know at all. All hip and happening brands, sportswear all through to surfwear. Skateboarding clothing and shoes might not be your thing, but it certainly is lots of others thing.

OK, so why would you buy the company at this juncture? The stock hardly looks cheap, and on a historical basis is trading above the long term average. But, I suspect the massive change in emerging market and specifically Chinese sales is for us something that will transform the business. In China 300 million people claim to be basketball fans, and around 30 million folks watch NBA matches through the season. 30 million people? That is the size of the Ugandan population. And that is I am guessing all because of Yao Ming. So I am guessing that Li Na can have a similar type of influence on tennis in China. The Chinese government want to increase the number of tennis players by 15 percent per annum. Good for Nike and their competitors.

The Chinese football association is government controlled and therefore "not great". Only one member of their national team shows his skills outside of China, in South Korea. Imagine if the Chinese were ready to host the 2026 world cup football. I suspect it might become a reality. And all it would take would be one footballer to capture that population. So we are confident on future sales growth and profitability, the analyst community has the company earning nearly 5 USD for the coming financial year. We can reconvene at Investors landing page, where the conference call will take place for five hours. Holy smokes. I will read the conference call tomorrow and be back with an overview.