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Jun 24, 2010
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Nike profit matches view, sees pressure ahead

By
Reuters
Published
Jun 24, 2010

* Q4 EPS of $1.06 matches Street view, revenue misses

Regulatory News

* Sees "significant pressure" from currency, input costs

* Orders up 10 percent excluding currency changes

* Shares fall 2.4 percent after-hours (Adds company comment, outlook, details on emerging markets; updates stock activity)

LOS ANGELES, June 23 (Reuters) - Nike Inc (NKE.N) on Wednesday said fourth-quarter profit jumped 53 percent to match Wall Street's view, but cautioned that the strong dollar and higher costs for oil, labor and shipping would weigh on profits and sales in the coming year.

Shares in Nike slipped 2.4 percent after the largest global player in the athletic shoe and clothing market said fourth-quarter revenue missed analysts goal.

The company, which is making a big splash at the World Cup soccer championships in South Africa, added that currency volatility and input cost inflation would put "significant pressure" on sales and earnings in its fiscal year ending May 2011.

"The stronger dollar and rising costs for product components such as oil, labor and freight will put significant pressure on gross margins," Nike Chief Financial Officer Don Blair told analysts on a conference call.

Nike said it now expects fiscal 2011 revenue, excluding the impact of currency exchange, to grow at a high-single-digit rate. It sees low-double-digit growth for the current first quarter.

Fourth-quarter net profit rose to $521.9 million, or $1.06 per share, for the fiscal fourth quarter ended May 31, from $341.4 million, or 70 cents per share, a year earlier.

Revenue increased almost 8 percent to $5.08 billion, but fell short of analysts' sales target of $5.15 billion, according to Thomson Reuters I/B/E/S. Excluding currency fluctuations, revenue rose 4 percent, Nike said.

By region, revenue in Nike's largest market of North America increased 4 percent to $1.8 billion. Revenue also gained around Europe and China, while Japan sales declined.

The company's emerging markets revenue leaped 47 percent to $556 million.

Revenue for soccer-related gear was up 39 percent during the fourth quarter.

"And that's before the first goal was scored at the World Cup," President and Chief Executive Mark Parker said on a conference call.

Nine World Cup teams, including the United States and Brazil, are sporting Nike kit and England is wearing a jersey bearing the company's Umbro brand.

Revenue for non-Nike brands, which include Cole Haan, Converse, Hurley and Umbro, increased 9 percent to $714 million.

Gross margins were 47.4 percent versus 43.4 percent a year ago as the company contained costs amid increased World Cup marketing spending.

Orders for Nike brand shoes and apparel scheduled for delivery from June through November totaled $8.8 billion and were up 7 percent from a year earlier. Excluding currency changes, orders would have increased 10 percent, Nike said.

Orders are a key gauge of demand and the company in the third quarter turned around a yearlong string of forward order declines.

Shares of Beaverton, Oregon-based Nike fell to $70.80 after closing at $72.52 on the New York Stock Exchange. (Reporting by Lisa Baertlein in Los Angeles and Alexandria Sage in New York, editing by Gary Hill, Matthew Lewis and Leslie Gevirtz)

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