Nike Q2 profit dips 4 percent; future orders rise

AP News
Posted: Dec 17, 2009 8:12 PM

Tiger Woods' situation may be worsening, but his key sponsor sees brighter days ahead for its business.

Nike Inc., the world's largest athletic shoe and clothing company, said Thursday its earnings dipped because of a sales decline in its fiscal second quarter. But company leaders said they are seeing hopeful signs of recovery and consumer sentiment around the world after several tough quarters.

Nike said its orders for goods to be delivered through the early spring were up 4 percent _ benefiting from the weaker dollar and with significant growth in Western Europe, China and emerging markets.

In the second quarter, Nike's profit fell 4 percent to $375.4 million, or 76 cents per share. Tight inventory and cost controls helped it withstand an 8 percent decline in revenue to $4.4 billion.

The results came in slightly better than expected: analysts polled by Thomson Reuters expected the company to earn 71 cents per share for the quarter on revenue of $4.4 billion

Nike leaders were also bullish on the 2010 World Cup and several new products on the horizon.

"The strength of the Nike brand remains in a very enviable position," Nike Brand President Charlie Denson said.

The World Cup, held every 4 years, accounts for some of its potential growth _ both for the Nike brand and the Umbro PLC business, which it acquired 2007. Nike executives wouldn't reveal its plans for the event but said it would be delivering "unprecedented intensity" in its marketing.

The company also said it would be launching "Fresh Air" in the spring, updating the look and performance of its Nike Air cushioning system.

"I'm not focused on calling a bottom or predicting a turnaround," Denson said. "My sites are focused on growing this brand and serving its consumers. I have no doubts that what you see from Nike between now and next fall will show you once again just how connected this brand is to our consumers and our opportunities."

Sterne Agee analyst Sam Poser said Nike did all it could do for the quarter in the tough economy but will likely face a challenging market until 2011.

What the company didn't address, Poser noted, is how its close affiliation with Tiger Woods would affect the sales and perception of Nike.

The quarter ended before the scandal surrounding Woods erupted, but Nike executives remained positive on the golfer's future with the company.

Nike CEO Mark Parker did not say how the golfer's relationship might affect its bottom line. But he noted that the roughly $650 million golf business, like much of the rest of the golf industry, has already been one of the hardest-hit segments of its business during the down economy.

"The only thing I'll say right now about Tiger is that we all know that he's chosen to step away from the game, and out of respect for his time and space he needs _ that he's asked for _ we'll respect that," Parker told investors Thursday. "And we'll continue to support Tiger and his family as we, of course, look forward to his return."

While some analysts have suggested Nike could scale back its athlete endorsements, given the risks, Parker said the relationships Nike has with athletes and teams are critical to the company.

"Ultimately we make those decisions on how to drive the strength of the brand and shareholder value and that certainly will not change," he said.

The impact on the company may depend on how long Woods stays out of golf, Poser said. And is likely to hit Nike's golf clothing sales harder than equipment, where users tend to be more loyal.

Shares of Nike rose $1.25 to $64.50 in after-hours trading Thursday after closing at $63.25.