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Nike Reports 20% Drop in Profit, Says Asia Woes Will Slow Sales

<i> From Reuters</i>

Sports marketing giant Nike Inc. said Thursday that profit fell 20% in the latest quarter, and it warned that sales will be slow over the next year, largely due to economic weakness in Asia.

The Beaverton, Ore.-based company said it earned $141 million, or 48 cents a share, in its fiscal second quarter ended Nov. 30, down from $176.9 million, or 60 cents, a year earlier. Revenue rose 7%, to $2.26 billion from $2.11 billion.

The earnings were well below the Wall Street consensus estimate of 55 cents a share. Nike forecast earnings of $2 to $2.15 a share for the fiscal year ending May 31.

The report was released after the close of the New York Stock Exchange, but in third-market trading Nike shares sank $3.31 to a 52-week low of $40. They had reached $76.38 earlier this year.

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Despite the increased revenue in the latest quarter, Nike said earnings had been hurt by the need to slash retail prices worldwide to move inventory, which ballooned to $1.4 billion at the end of the quarter, compared with about $980 million a year earlier.

Nike said its closely watched futures orders for goods to be delivered from December through April fell to $4.2 billion, a 1% decline from the year-ago period that was blamed largely on the slowdown in Asia.

In a conference call with industry analysts and reporters, Nike Chairman and Chief Executive Phil Knight said the company had expected a slowdown after three years of strong growth but that the sudden turnabout in Asia “caught all of us a little bit by surprise.”

“Nevertheless we think structurally the company remains sound and it remains a good industry,” he said.

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