Despite Higher Sales, Marketing Costs Drive Nike To A 7.6% Drop In Profit For Q4
Nike reported a 7.6% "drop in profit for its fiscal fourth quarter despite solidly higher sales as higher marketing costs pressured margins," according to John Kell of the WALL STREET JOURNAL. The company's "gross margin narrowed for a sixth-straight quarter on a year-over-year basis." The latest decline "was attributed to higher product costs and increased investments in Nike's digital business, offsetting price increases and lower air freight costs tied to improved factory deliveries." So-called "demand creation expenses jumped 23% to $760 million in the latest quarter, driven by marketing costs tied to key product launches, the European Football Championships and the Summer Olympics." Worldwide future orders, an "indicator of growth, jumped 7% while inventories -- which have surged of late -- increased 23%." For the quarter ended May 31, Nike "reported a profit of $549 million, or $1.17 a share, down from $594 million, or $1.24 a share, a year earlier." The latest period included a $24M "restructuring charge related to Nike brand's Western Europe operations." Revenue "increased 12% to $6.5 billion, or 14% excluding currency impacts." By category, footwear and apparel sales "jumped 12% and 10%, respectively." The smaller-equipment unit posted "a 20% increase in sales." Sales growth was "strongest in greater China, up 18%, while emerging markets, North America, Central and Eastern Europe, and Japan all notched double-digit top-line growth." Nike's Western Europe sales "posted a more modest 2% increase" (WALL STREET JOURNAL, 6/29).