Nike To Evaluate U.S. Operations After Mixed Q1 Results
Nike on Thursday "revealed a company taking a hard look at its U.S. operations, saying it would sell [its Bauer Hockey] unit, evaluate the future" of Exeter Brands Group and invest more money into marketing and new Nike-owned retail stores, according to Brent Hunsberger of the Portland OREGONIAN. Despite double-digit sales growth in Europe, China and Latin America, as well as the 24th consecutive quarter of overall revenue growth, Nike's U.S. sales increased only 2%, "as urban teens continued to avoid high-priced basketball shoes.” Apparel and equipment sales in the U.S. fell by 1% on “weak sales of Jordan-brand items and higher-priced fleece clothing and T-shirts.” Nike Dir of Media Relations Alan Marks said that the decision to stop selling products endorsed by Michael Vick had “no material impact on quarterly results.” Nike CFO Donald Blair said that Nike will sell Bauer Hockey because the company saw “less growth potential and lower profit margin in the $160[M]-a-year equipment and apparel business.” Nike President & CEO Mark Parker said that the company will also launch a “strategic review of its Exeter Brands Group, which sells lower-priced shoes” through retailers such as Payless ShoeSource and Wal-Mart. Susquehanna Investment Group analyst John Shanley: “They’re doing what any other business would do. They’re looking at things that may be underperforming in the rest of their brand portfolio” (Portland OREGONIAN, 9/21). The WALL STREET JOURNAL’s Paula Stepankowsky notes Nike is also “partnering with top customer Foot Locker to open about 50 ‘House of Hoops by Foot Locker’ basketball stores in the U.S. over the next three year as it seeks to expand its own retail network to better control how its products are displayed and sold” (WALL STREET JOURNAL, 9/21).
NUMBERS: Overall Nike’s Q1 earnings rose 51%, led by a 16% increase in the Europe, Middle East and Africa division to $1.47B, while Asian revenue rose 22% to $630.8M. Revenue in the Americas increased 15% to $279.5M, and U.S. revenue rose 2% to $1.64B. The company’s world-wide futures orders rose 11.5% to $5.9B for the period from September ’07-January ’08. Parker indicated that Nike is “on track to increase annual sales to $23[B] by fiscal 2011” (WALL STREET JOURNAL, 9/21). As of presstime Friday, Nike shares were trading at $58.72, up 0.69% from Thursday’s close of $58.32 (THE DAILY).
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