Nike Slipping on China Struggles

by InvestorPlace Staff | September 28, 2012 8:54 am

Sports apparel titan Nike (NYSE:NKE[1]) was set to open lower Friday morning after revealing in its fiscal first-quarter earnings report that it was continuing to struggle in China.

Overall orders from September to January improved 8%, which was short of analysts’ hopes for 10% — that was weighed down by future orders in China, which declined 6%, compared to a 22% increase in the year-ago period.

Canaccord Genuity Corp. analyst Camilo Lyon illustrated the concern to Bloomberg Businessweek[2]:

“The futures numbers are what’s most important and when you’ve got a negative China number and deceleration in global future numbers, that’s what’s driving the stock down. (The China orders) were worse than anyone expected.”

Q1 revenues improved 10% to $6.67 billion, beating Wall Street estimates. However, earnings of $567 million ($1.23 per share), while beating analyst expectations for $1.12 per share, still were down 12% from the year-ago period thanks to gross margins that shrank 80 basis points to 43.5%.

NKE shares were down 4% in Friday pre-market trading.

– Kyle Woodley, InvestorPlace Assistant Editor

Endnotes:
  1. NKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=NKE
  2. Bloomberg Businessweek: http://www.businessweek.com/news/2012-09-27/nike-futures-orders-trail-estimates-on-weak-china-demand

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