Nike Inc. reported lower net income than expected for its third quarter as the athletic shoe and clothing company struggled with higher costs for materials, labor and freight.
The news shocked investors, who are used to Nike consistently outperforming Wall Street's expectations. The company's shares plunged in after-hours trading Thursday.
Nike's net income rose 5 percent to $523 million, or $1.08 per share, from $497 million, or $1.01 per share, in the same period a year earlier. Its revenue rose 7 percent to $5.08 billion as sales rose in most markets around the globe.
The company, which is based in Beaverton, Ore., warned investors in December that rising costs would cut into its profit margins in the second half of the year even as revenue rose. But analysts had anticipated stronger margins. On average, they forecast earnings of $1.12 per share on revenue of $5.17 billion, according to FactSet.
Nike executives said higher costs will continue to hurt its profitability into 2012. It plans to raise prices on a broad array of products beginning this spring and control its costs, but those moves may not pay off until much later.
"Whatever may be unknown in the global economy, you can be absolutely certain that we'll continue to invest in our single biggest competitive advantage: our fixation on innovation that benefits consumers and shareholders," CEO Mark Parker said.
Company leaders said sales rose in nearly every market worldwide, in part with the introduction of new products.
But that growth was uneven: Revenue rose 9 percent in North America and 21 percent in China but fell 2 percent in Western Europe and 8 percent in Japan. Excluding the impact of currency fluctuations, revenue rose in all markets except Japan, where Nike has long struggled with sluggish sales.
Japan is a relatively small market for Nike, however.
The company said its employees in Japan all are accounted for, and it extended its sympathies to the country as it struggles with the impact of the earthquake and tsunami. The company said it is working with relief agencies to assist any way it can.
Nike said demand would continue to grow around the globe. It said orders for the upcoming season, which many investors look to for insight into the company's near-term strength, rose 11 percent.
"While the headwinds we face are the same for everyone, the competitive advantages we have are ours alone," Parker said.
Shares of the company fell $4.81 _ 5.6 percent _ to $80.60 in after-hours trading. They had ended regular trading up 59 cents and have traded between $66.34 and $92.49 the past 52 weeks.
Nike's quarterly earnings haven't fallen below analysts' average forecast for nearly eight years, according to FactSet.