Shares of Nike Inc. (NKE) lost ground in morning action before gaining it back today after reporting a stronger third-quarter profit but warned of shrinking worldwide demand.
Nike, the world’s leading designer, marketer and distributor of athletic footwear, apparel, equipment and accessories for a wide array of sports and fitness activities, said it earned 99 cents per share for its third quarter excluding an impairment charge from its recently acquired Umbro soccer brand.
That compares to earnings of 92 cents per share a year ago and analysts estimates of earnings of 79 cents per share, according to Reuters.
But the company proved that not even it was immune to an economic crisis, and as consumers cut back on discretionary spending during the quarter revenues fell by 2 percent from a year ago to $4.44 billion — and shy of Wall Street estimates of $4.48 billion.
President and CEO Mark Parker said the results said a lot about the strength and diversity of Nike, and that in a challenging environment the company delivered excellent operating results by executing with both focus and flexibility. “I feel very good about our performance and our potential,” he said.
Investors may need to wait for that potential. The company disclosed that worldwide future orders for Nike branded footwear and apparel for delivery from March 2009 through July 2009 was $6.5 billion, down 10 percent from the same time frame a year ago.
Nike said futures orders were particularly weak in EMEA (Europe, Middle East and Africa), with the U.S. and Asia Pacific showing slight declines. Though changes in currency exchange rates accounted for the bulk of the decline, orders still fell 2 percent on a constant currency basis.
In the latest quarter Nike said revenue rose 3 percent in the U.S. as footwear sales offset declining apparel demand. But revenue fell in the EMEA region by 14 percent and by 5 percent overall in the Americas.
The company’s results were also hurt as gross margins fell due to higher product costs and markdowns to clear inventory. Selling and administrative costs came down in the quarter helping to offset those negatives as the company made good progress in trimming expenses.
Nike is currently in the midst of a companywide review to cut costs and said it would take a restructuring charge of $175 million to $225 million in the current quarter. It previously said it could cut up to 4 percent of its workforce in its effort to streamline its business after the review is completed on May 31.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
