In this Monday, March 19, 2012, photo, Nike shoes are displayed at Modell's Sporting Goods, Monday, March 19, 2012, in Philadelphia. Nike says its fourth-quarter net income fell 8 percent as restructuring charges and higher raw material costs offset price increases that helped boost its revenue. (AP Photo/Matt Rourke)
June 28, 2012 - 7:25 PM
NEW YORK, N.Y. - On the eve of the summer Olympics, Nike's fourth-quarter results weren't a personal best for the athletic gear maker.
Nike Inc. said Thursday that its fourth-quarter net income fell 8 per cent as high product costs, a restructuring charge and an unexpected customs assessment offset revenue growth across the company.
The results fell short of analysts' expectations, and Nike Inc.'s shares plunged more than 10 per cent after hours following the report.
It was a rare miss for the world's largest athletic shoe and clothing company, which has beaten analyst expectations in 17 of the past 18 quarters. It comes as a number of companies are warning that slowing results in Europe and China are weighing on their earnings.
CEO Mark Parker told analysts on a conference call Thursday that the company expects volatile economic trends to continue into Nike's current fiscal year.
"We will see continued uncertainty in the global economy and commodities and labour costs will continue to fluctuate," he said. "Currency pressures (have) increased, especially in Europe and the emerging markets, and China's economy is expected to grow more slowly than we've seen over the past five years."
Nike said its gross margin — the amount of each dollar made in revenue that a company actually keeps — fell as marketing expenses rose surrounding the European Football Championships and the Summer Olympics, its tax rate climbed and it faced a charge related to restructuring its operations in Western Europe. Even price hikes didn't help.
Nike's net income fell to $549 million, or $1.17 per share, compared with $594 million, or $1.24 per share, a year earlier. Analysts were expecting $1.37 per share, according to FactSet.
Revenue rose 12 per cent to $6.47 billion, while analysts expected $6.51 billion. Nike brand revenue rose 15 per cent.
Revenue increased in all regions, but growth was weakest in Western Europe, where it rose 2 per cent to $1.04 billion. In North America, Nike's revenue rose 13 per cent to $2.42 billion. In China, revenue rose 18 per cent to $667 million.
Also eating into its gross margin were higher product costs, higher spending on digital business and the customs assessment, which came in an emerging market that the company didn't name. Nike said the assessment was related to imports during the past four fiscal years.
Those expenses offset price increases, lower air freight costs and continuing cost cuts.
For the fiscal year, net income rose 4 per cent to $2.22 billion, or $4.73 per share, from $2.13 billion, or $4.39 per share last year. Revenue rose 16 per cent to $24.13 billion from $20.87 billion last year.
Nike, based in Beaverton, Ore., has been focusing on its most profitable businesses to drive growth. In May, it said it plans to sell two brands — Umbro soccer gear and Cole Haan shoes and accessories — to cut costs.
The company has introduced new products, including FlyKnit lightweight shoes, which have a top layer made with a single piece of yarn. Ultra-light, the shoes will be worn by athletes competing at this summer's Olympics for the U.S., U.K., Russia and Kenya. They will be available to the general public next month.
The company also plans on Friday to start selling Nike+ technology-equipped basketball and training shoes, which collect data on the wearer's athletic performance and send it to mobile apps.
For the new fiscal year, Nike said that, excluding reductions related to selling its Umbro and Cole Haan business, it expects revenue to rise by a percentage in the high single digits or slightly above. It expects its earnings per share to rise by a percentage in the high single digits. The earnings per share increase is shy of the company's long-term aim to grow by percentages in the mid-teens.
Its shares fell $12.39, or 12.8 per cent, to $84.50 after hours. They had ended regular trading at $96.89, down $1.22, or 1.2 per cent. They have traded between $76.98 and $114.81 over the past 52 weeks.
News from © The Associated Press, 2012