Nike Inc. charges, weaker sales cut into profit

Nike Inc. saw the impact of a global economic meltdown in its fiscal third quarter as a stronger dollar and weaker consumer spending drove down profit, revenue and future orders for the world's largest athletic shoe and apparel company.

The Beaverton-based company reported after the market closed that its net income slipped to $243.8 million, or 50 cents per share, for the quarter ended Feb. 28. That's down from a profit of $463.8 million, or 92 cents per share, in the same period last year.

The slide was due largely to an after-tax charge of $240.7 million tied to Nike's acquisition of Umbro PLC. Nike said the charge, which reflects the declining value of its investment in the soccer brand, is a direct result of the deteriorating consumer market since it acquired Umbro more than a year ago.

Excluding the charge, Nike's profit would have increased to $484.5 million, or 99 cents per share, for the quarter.

Nike's revenue fell 2 percent to $4.4 billion for the quarter.

Analysts polled by Thomson Reuters, on average expected a profit of 79 cents per share on sales of $4.49 billion. Analyst estimates typically exclude one-time items.

The company is limiting its expenses — trimming jobs, streamlining management and potentially consolidating some of its production. Nike's management said it will continue to tightly manage inventory and capital spending.

But Nike will continue to face challenges from weak consumer spending. It reported that orders for products to be delivered through the spring and summer were 10 percent lower than in the same quarter last year.

The news sent Nike's shares down more than 4 percent in after-hours trading.

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"In a challenging environment, we delivered excellent operating results by executing with both focus and flexibility," said Mark Parker, Nike's president and chief executive. "I feel very good about our performance and our potential."

"It was definitely a mixed bag," said Christopher Svezia, an analyst with Susquehanna Financial Group. "They were certainly some incremental positives and some glaring negatives — currencies and macroeconomic pressures."

Nike leaders cited the company's brand strength as a powerful asset in turbulent economic times. They said that, along with its a focus on strategy and controlling its financials, will carry it through the downturn.

"Without question we are in unprecedented times, we remain prudently cautious," said Don Blair, chief financial officer at Nike.

Nike stock closed Wednesday at $45.92, up 51 cents. It slipped to $44.00 in after-hours dealings.