Nike Q3 Earnings Exceed Forecasts, Excluding One-Time Expense

Excluding the acquisition of Umbro, Nike's net income increased 4% to $484.5M for Q3, as the company "continues to outperform most competitors," according to Laura Oppenheimer of the Portland OREGONIAN. But Nike also is "showing signs that it, too, feels the pinch of reluctant customers." A year after acquiring Umbro, Nike "wrote down its value" by $240.7M, more than 40% of the purchase price, and including that transaction, Nike's net income fell 47% to $243.8M for the quarter ended February 28. Nike execs "attributed the Umbro write-off to poor market conditions in Great Britain, where the subsidiary is based, and their decision to scale back investment in the brand." But excluding the one-time expense, Nike's earnings per share improved 8% to $0.99, "beating analysts' forecast." And while revenues declined 2% to $4.4B, they "would have increased 2[%] in currency rates had stayed the same." U.S. revenue growth "helped offset a 14[%] decline in Nike's European region," while orders "for the next five months are down 2[%] worldwide, taking into account changing currency rates." Oppenheimer notes Nike in recent months has "cut travel, meeting and marketing costs," and the company "will consolidate manufacturing operations in the coming months." Nike execs this spring "expect to lay off as much as" 4% of their 35,000-person work force (Portland OREGONIAN, 3/19). At presstime, Nike shares are trading at $45.46, down 1.0% from yesterday's close at $45.92 (THE DAILY).

LIVING IN THE FUTURES: The WALL STREET JOURNAL's Nicholas Casey notes Nike "could be facing tougher times ahead as its so-called futures orders for apparel and shoes declined 10%." Futures orders for footwear and apparel in Q3, "scheduled for delivery in spring and early summer," were $6.5B, down from $7.2B in the year-ago period (WALL STREET JOURNAL, 3/19). Fox Business' Robert Gray said, "We’ve got future orders down 10% versus a year ago. This is what a lot of investors look to, obviously, for demand going forward." He added that was a reason Nike shares were "giving back some in afterhours” ("Fox Business Bulls & Bears,” Fox Business, 3/18).