Nike’s 4th-qtr income up with higher revenue, margins; meets forecasts but investors leery

Nike 4Q profit up but investors leery

PORTLAND, Ore. — Nike Inc., the world’s largest athletic shoe and clothing maker, on Wednesday reported fourth-quarter profit that just met expectations, but it said fluctuating currency exchange rates, rising costs and shaky consumers could hinder its performance this year.

Nike’s shares fell in after-hours trading.

The company, based in Beaverton, Ore., earned $522 million, or $1.06 per share, for the quarter as revenue and margins improved. That’s up 53 percent from $341.4 million, or 70 cents per share, in the same quarter a year earlier.

Excluding the restructuring charge from last year’s fourth quarter, Nike’s net income grew 7 percent.

Revenue for the period, which ended May 31, rose 8 percent to $5.1 billion. But the increase was just 4 percent, excluding currency fluctuations.

The results just met Wall Street’s expectations, spooking investors accustomed to Nike beating analyst forecasts.

Analysts polled by Thomson Reuters, on average, had anticipated the company would earn $1.06 per share on revenue of $5.15 billion for the fourth quarter.

Nike management was bullish on the company’s performance — highlighting record gross margins, revenue in key markets and lines. The company said it has tight inventory controls and one of its strongest balance sheets ever with more than $5 billion in cash and short-term investments.

But it said the stronger dollar and rising costs oil, labor and freight could significant depress its margins in the first quarter and for the year.

“You flesh out the numbers and it doesn’t look as attractive,” said Christopher Svezia, an analyst with Susquehanna Financial. “It’s a good quarter, just not a typically Nike quarter.”

For the full year, Nike’s net income rose 28 percent to $1.91 billion, or $3.86 per share, from $1.5 billion, or $3.03 per share, in fiscal 2009. Excluding one-time items, it rose 2 percent.

Annual revenue fell 1 percent to $19 billion and was down 2 percent excluding currency changes.

“We are certainly aware of the risks presented by high unemployment and extreme volatility in the commodity, currency and equity markets,” Nike’s CEO Mark Parker told investors Wednesday. “But we’re also confident in our ability to deliver consistent results by staying focused on our business strategies and remaining nimble as we implement them.”

Nike said orders for products to be delivered from now through fall — a key indicator for the company — are 7 percent higher than for the same period last year.

The company also highlighted its strength in soccer, where its revenue was up 39 percent in the quarter — before the first goal was even scored at the World Cup.

Nike, which is not an official sponsor of the international tournament, has gotten tremendous exposure from it nonetheless because it sponsors many athletes and teams and launched a marketing campaign that has received so much buzz some experts say Nike’s benefiting more than the actual sponsors.

Nike said business improved greatly in the second half of its fiscal year and it anticipates building on the success of World Cup and other efforts.

But its investors will be waiting to see if that momentum, given currency and cost pressures, will translate into profits.

Shares of Nike fell $1.66, more than 2 percent, in after-hours trading.