SBD/December 21, 2012/Finance

Nike Q2 Profit Shrinks 18% From Losses Of Cole Haan, Umbro Sales

Parker said he sees "tremendous growth potential" for Nike in North America
Nike’s fiscal Q2 profit “shrank 18% as results were weighed down by $137 million in losses tied to the sale of the Umbro and Cole Haan brands, masking strong demand for the athletic-goods giant's products,” according to John Kell of the WALL STREET JOURNAL. The company's “top line jumped as sales grew for the namesake brand's equipment, footwear and apparel.” Growth was “strongest in the North American market, helping offset weakness in China and Western Europe.” Gross margin “slid to 42.5% from 42.8%, the eighth straight quarterly decline on a year-over-year basis.” Worldwide future orders, an “indicator of growth, increased 6% while inventories grew 9%.” Nike for the quarter ended Nov. 30 “reported a profit of $384 million, down from $469 million a year earlier.” On a per-share basis, earnings from continuing operations “were $1.14 versus $1.03, while losses from discontinued operations were 30 cents, compared with three cents last year.” Revenue from continuing operations “improved 7.4% to $5.96 billion.” Regionally, sales growth was “strongest in the North America market, Nike's largest region, where the top line soared 17%.” China's future orders “slid 6% in the latest quarter, worse than the 5% decline in the prior period.” Many analysts said that they “don't see trends improving in that market for at least six months” (WALL STREET JOURNAL, 12/21). Nike CEO Mark Parker said, "In North America, we've created great momentum. This is counter-intuitive to some, given this market's size and assumed maturity. But I see tremendous growth potential in North America." In Portland, Allan Brettman reports greater China was the “only geographical region to show a revenue decline: an 11 percent fall, reflecting $577 million in sales this quarter compared to $650 million in the last.” Parker: "We know what needs to be done in China. We know we can do it, because we've done it before. And we're confident we will continue to grow and lead this market.” Nike Brand President Charlie Denson said that the company has “set a plan in motion to right the course in China and already has seen improvement” (Portland OREGONIAN, 12/21). At presstime, Nike shares were trading at $103.70, up 4.70% from Thursday's close of $99 (THE DAILY).

TIP OF THE HAT: The FINANCIAL TIMES’ Tony Barber writes adidas shareholders “should thank the super-confident” Chair & CEO Herbert Hainer for “guiding the company skillfully through a year that threw up more than its fair share of unusual challenges.” adidas is set to finish ‘12 with a stock price “up more than 40 per cent from its level 12 months ago.” Moreover, a recent “clear-out of top executives at Puma contrasts starkly with the long-term boardroom stability” at adidas. The company’s “success did not come easy,” as Hainer began the year “knowing that Nike would take over” as the official uniform supplier for the NFL, previously held by adidas subsidiary Reebok. Matters at Reebok “went from disappointing to ugly when a forensic audit uncovered extensive fraud at Reebok’s Indian unit.” In addition, the NHL lockout is “eating into the [US$162M] in annual revenues that Adidas gets from Reebok’s NHL-related sales.” adidas has therefore “slashed its 2015 sales target for Reebok by a startling one-third” to US$3.2B (FINANCIAL TIMES, 12/21).
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Finance, Nike, Adidas, Reebok

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