Nike Reports Q4 Earnings Growth, Concerns Exist Over U.S. Sales
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Parker Indicates Nike's Int'l Growth Is Strong,
While Analysts, Investors Worry About U.S. Sales |
Nike yesterday reported FY '08 year-end revenues "topped $18.6[B] while [Q4] earnings grew 12[%]," according to Brent Hunsberger of the Portland OREGONIAN. But Nike earned $390.7M in Q4 U.S. profits before taxes, down 10% from the year-ago period, and orders from retailers for Nike footwear and apparel "for the next six months came in flat in the U.S., making the prospect of sales growth difficult in Nike's largest market." Nike Brand President Charlie Denson said that the company is "'resetting' its U.S. sportswear apparel business." Nike sales for the FY increased $2.3B to $18.6B, and net earnings grew $400M to $1.9B, though Hunsberger notes "most of that growth took place outside" the U.S. Nike CFO Donald Blair said that Nike-brand revenues worldwide for the FY grew 9% and futures orders increased 8%. Nike sales in China "exceeded $1[B] for the first time, as did sales in its Latin and South America region." And Nike President & CEO Mark Parker said that revenue growth in China alone was up 50%. Parker added that Nike subsidiaries Converse Inc., Cole Haan, Nike Golf and Hurley Int'l "collectively drove double-digit revenue growth to $2.6[B], with Converse leading the way." Nike added that it expects subsidiary Umbro to "erode earnings by [$0.10] a share in [FY '09] as Nike invests in the company." Parker said that Umbro "lost money for Nike this year." Hunsberger notes Nike's results were "aided by the benefit of stronger foreign currencies versus the dollar, unexpectedly lower tax rates, and a special one-time gain from the sale of its Nike Bauer Hockey." Nike shares yesterday closed at $65.97, but fell $3.28 in after-hours trading as analysts "found concern in Nike's weaker U.S. business and higher-than-expected spending on marketing, mostly related to the upcoming Olympics" (Portland OREGONIAN, 6/26).
MOVING FORWARD: Nike execs said that they are "managing the tightening U.S. discretionary spending by focusing on selling higher-quality goods that appeal more to penny-pinching consumers." They added that they "expect high single-digit percentages revenue growth" for FY '09 (WALL STREET JOURNAL, 6/26). McAdams Wright Ragen analyst Sara Hasan: "Nike has been resilient in the U.S. because of its brand. It's hard to say how long they can keep that up. It's a concern for investors. International is the majority of where their future growth is coming from" (MARKETWATCH.com, 6/25). However, Thomas Weisel Partners Sports & Lifestyle Analyst Jim Duffy said he has a “buy rating” on shares of Nike because the company has “tremendous opportunities overseas.” Duffy: “They've got a number of businesses in emerging markets which are well underpenetrated and growing at very healthy clips.” CNBC’s Darren Rovell said Nike is "as well positioned as anyone in terms of getting through this exposure period in the economy in the U.S.” Duffy: “I think you're going to see Nike's fundamentals continue to outperform the greater market, and I think that we will see the shares be rewarded with people recognizing that” (“Squawk on the Street,” CNBC, 6/26). At presstime, Nike shares are selling at $60.11, down 8.88% from yesterday's closing at $65.97 and down 1.22% from this morning's opening at $60.85 (THE DAILY).
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