Nike yesterday reported revenues and earnings for the
company's third quarter ended February 28, 1998. Third
quarter net income totaled $73.1M or $0.25 per share
compared to $237.1M, or $0.80 per share from the same period
one year earlier. Third quarter revenues were $2.22B, down
8% from $2.42B last year. Nike also reported that its
fourth quarter '98 earnings will be reduced by an estimated
restructuring charge of between $125-$175M. Included in the
charge will be costs associated with the anticipated
reduction in the company's global workforce of approximately
1,600 positions, or 7% of the workforce. Nike reported that
U.S. footwear revenues declined 18% to $800.4M, compared to
$980.4M last year. Nike Chair Phil Knight: "The actions we
announce ... as difficult as they are to undertake as they
impact our human assets -- will result in a leaner and more
competitive Nike as we move into fiscal 1999." Nike said
that measures taken, combined with efforts to maintain an
efficient cost structure in the U.S. and Asia Pacific, are
expected to result in projected reduced spending in excess
of $100M in '99. Gross margins for this year, however, will
be negatively impacted by approximately $100M (Nike).
HOW IT'S PLAYING: CNBC's Felicia Taylor called the
earnings report "right on line with street estimates," with
earnings down nearly 70%. Nike stock gained 1 3/4 per share
on Wednesday, closing at 44 1/8 ("The Edge," CNBC, 3/18).
In N.Y., David Bank reports that Nike attributed the U.S.
"shortfalls to an intense price war, as sneaker makers tried
to move inventory off the shelves." Nike said sales also
fell in Asia, with the "biggest trouble spot" being South
Korea where sales fell 52% (WALL STREET JOURNAL, 3/19). In
the lead story of the N.Y. TIMES' "business section," Sharon
King writes under the sub-head, "In Footwear Wars, Nike
Lags, Adidas and Other Surge." King: "While outside factors
conspired against Nike, management made its own missteps: a
surge in inventory, an increase in prices, a lackluster ad
campaign, a failure to hit upon a new big idea." King adds
that recently, Nike "seems to have become too big, too
comfortable and too establishment for the young, energetic
consumer" (N.Y. TIMES, 3/19). The AP's William McCall said
that Nike "has become viewed by many shoe-buying teens as a
synonym for corporate America, and their views are beginning
to show up on the bottom line" (AP/Mult., 3/19).
