Nike announced that it expects its third quarter
earnings ending February 28 to be between $.24 to $.28 per
share, below the First Call estimate of $.38 per share.
Nike added that its earnings for the full year will be below
the previously stated range of $2.00 to $2.15 per share.
Nike said it is experiencing higher than anticipated order
cancellation rates in the Asia Pacific region, while higher
levels of close-out sales in the U.S. continue to negatively
impact gross margins. Nike added that it is examining its
overall cost structure and plans to take actions, including
realignments and reductions in its global workforce (Nike).
DETAILS: Nike's estimates led CNBC's "Business Center"
and "The Edge." CNBC's Sue Herrera reported that Morgan
Stanley Dean Witter analysts estimate Nike "might have to
cut up to 2,000 jobs" ("The Edge," CNBC, 2/24). CNBC's
Garrett Glaser: "Nike laid most of the blame for its
earnings problems overseas in Asia. The company says
economic turmoil in the region has made shellshocked
consumers there reluctant to spend money on Nike sneakers"
(CNBC, 2/24). CNN's Lou Dobbs said Nike "surprised Wall
Street by saying 'I Can't'" ("Moneyline," 2/24).
REAX: Faye Landes, Salomon Smith Barney analyst: "I'm
not convinced, unfortunately, that this is the last time
that we're going to see this. ... What we're seeing now is
serious indigestion after some explosive growth." Landes
added that the "underlying factors that have led to this
announcement" are "unlikely to dissipate right away."
Landes: "[U]nfortunately, there are some real fashion issues
and saturation issues which Nike is very unlikely to get
past near-term" ("The Edge," 2/24). In DC, Tim Smart writes
that teens "are turning against $150" athletic shoes in
favor of "brown hiking boots and other more mundane casual
shoes." Nike's inventory buildup at retail reflects "their
less-than-exalted status," and Nike said its inventory had
"soared" by nearly $500M to $1.4B (WASHINGTON POST, 2/25).
