Profit Warning Sends Nike Stock Plunging
Shares in Nike Inc. dropped 19% after the athletic apparel and shoe company warned that its earnings will be hurt this fiscal year and next by retailers’ plans to close hundreds of sporting-goods stores.
The stock fell $8.25 to close at $37 in New York Stock Exchange trading.
Earnings for the fiscal year ending May 31 could be slightly less than the average $2.08-a-share forecast of analysts polled by First Call/Thomson Financial, Nike executives told analysts in New York. For fiscal 1999, the Beaverton, Ore.-based company had a profit from operations of $1.66 a share. Earnings for fiscal 2001 are likely to increase by a percentage in the mid-teens, Nike said, less than the 20% analysts had expected.
Nike’s sales fell 8.1% last year as consumers switched to dressier styles and stores cut prices to clear out surplus sneakers, sweatpants and T-shirts.
The stock has lost more than half its value since it peaked at $76.38 three years ago.
Venator Group Inc., a leading seller of athletic shoes, last month announced plans to close about 150 of its Foot Locker, Lady Foot Locker, Kids Foot Locker and Champs stores. Just for Feet Inc. said in October that about half its 85 locations would close.
Nike also said some profit weakness is due to the euro, which has fallen 13% against the dollar in the last 12 months. Europe accounts for about a quarter of Nike’s sales.
The warning comes as Nike’s business had been starting to rebound. Its worldwide sales rose in its fiscal second quarter for the first time in almost two years.
Venator, the company formerly known as Woolworth Corp., accounted for about 10% of sales of Nike-brand products in fiscal 1999, according to a regulatory filing. Just for Feet, based in Birmingham, Ala., filed for bankruptcy protection in November, citing lagging sales and excess inventories.
Sports Authority Inc., Footstar Inc. and JumboSports Inc. all closed stores last year.
Nike President Thomas E. Clarke noted that the store closings will aid the industry’s profitability and benefit the company over the long term.
