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SBD/March 21, 2014/FinancePrint All
Nike's Q3 results "beat analysts' estimates," but after a conference call with analysts on Thursday, the markets "had soured -- reacting to forecasts of lower-than-expected fourth-quarter revenue and slower growth in the next fiscal year," according to Allan Brettman of the Portland OREGONIAN. Nike in Q3 reported a 3% profit jump to $685M, while diluted earnings per share increased 4% to 76 cents. A Reuters report showed that Nike's total revenue rose 12.7% to $6.97B, above the "consensus analyst estimate" of $6.69B. Nike CFO Don Blair during the conference call said that Q4 revenue is "expected to grow by a high-single digit percentage from the same quarter last year -- below what analysts expected." He added that Nike also has "projected revenue growth for the next fiscal year that's a little below its mid-teens target range." Brettman notes selling and administrative expenses for Q3 were up 16% to $2.2B, "reflecting upcoming World Cup costs and investments in retail product presentation for wholesale accounts." Demand creation expense -- a "catchall for marketing, advertising and sponsorships" -- was $733M, up 18%. Blair said that the expense "could have been even higher, but some spending was pushed to the next quarter." Brettman notes after "months of warning about lowered expectations and flat growth in China," Nike recorded a 9% sales increase in the quarter, with a 14% increase in footwear sales. However, Blair said that "future orders" are down 3% and "flat to down Q4 growth expected" (Portland OREGONIAN, 3/21).
CAUSES FOR CONCERN: BLOOMBERG NEWS' Townsend & Patton note orders for the Nike brand "from this month to July" rose 14%, "excluding the effects of foreign-currency exchange-rate fluctuations." Edward Jones & Co. Senior Analyst Brian Yarbrough said that there were "a couple points of concern in the orders." First, Nike's 9% rise in North America future orders marks "the first time they hadn’t recorded a double-digit percentage gain" since '10. Second, orders in Greater China, which "the company has been trying to turn around," declined 3%. Analysts "expected" a gain of 2.7% in China and 11.2% in North America (BLOOMBERG.com, 3/21). At presstime, shares of Nike were trading at $76.73, down 3.21% from the close of business on Thursday (THE DAILY).