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On Fire: Nike Posts Q1 Results that Sprint Past Wall Street Forecasts

Nike, the world’s largest athletic footwear and apparel company, continued to trade near all-time highs on Monday after releasing first quarter earnings last week that shattered Wall Street expectations, and put the company’s market cap at over $77 billion.

For the three months ended August 31, revenues increased 15 percent to $8 billion. Sales grew by 20 percent in China and 25 percent in Western Europe. Revenues for the Nike brand were $7.4 billion, with growth in every product type, geography and key category except action sports (skateboarding, snowboarding, etc.) and golf. Revenues for Converse were $575 million, up 16 percent driven by strength in Europe, Asia, the U.S. and U.K. Sales of footwear, the company’s most profitable business, were up 18 percent.

Gross margin increased by 170 basis points to 46.6%. The increase was due to a shift in the product mix to higher margin product, high average prices, and shifts to the direct-to-consumer business, partially offset by some higher product costs.

Despite an increase in SG&A expense of 21 percent, largely due to marketing investments in the World Cup and higher overhead due to the expanding direct-to-consumer business and operational infrastructure.

Diluted earnings per share rose 27 percent to $1.09, compared to analyst consensus estimates of $0.88.

Nike’s online sales rose 70 percent in the period, after successful moves to improve both and the Nike ID site, which gives shoppers the option to customize shoes and gear to their individual tastes. Shoppers can pick the color and pattern of nearly all parts of their new shoes, and even have an inspirational message sewn into the tongue of the shoes. The company reported that online sales of women’s shoes and apparel grew significantly, thanks in part to the Nike Plus Training Club app, which has been downloaded 17 million times.

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This summer’s World Cup helped the company build its brand in international markets. Although not an official sponsor of the tournament, it did sponsor the greatest number of teams at the Cup, including the U.S. The huge push into the soccer market has helped enhance awareness of its brand around the world.

The company successfully outbid Under Armour for the $300 million endorsement deal of basketball superstar and Oklahoma City Thunder Forward Kevin Durant. Durant will join Nike’s roster of stars which includes such legendary athletes as Michael Jordan, LeBron James, Cristiano Ronaldo, Derek Jeter and Tiger Woods.

Nike is also making a major push into technology. According to sources, Nike filed over 500 patents last year, a new company record. It entered the wearables market with the Fuel Band, and hopes to build on its longstanding partnership with Apple to bring more wearables to market to help customers improve their athletic performance and health.

CEO Mark Parker said in a statement that fiscal year 2015 is off to a strong start, and added that because of its connection to consumers, ability to innovate and powerful global portfolio, the company has never been better positioned to realize its tremendous growth potential.