Nike Faces Falling Profits as Costs Increase

Nike Faces Falling Profits as Costs Increase

NIKE, Inc. (NYSE:NKE) is seeing a massive tumble in share price, from an opening price of $97.54 yesterday, the stock has made a steep fall of more than 10% and is now trading at around $87 (10:50 AM EDT). These bad tidings for Nike have come coupled with the disappointing financial statements filed by the company for the first quarter of fiscal 2012.

the Beaverton, Oregon-based company reported a 7.6% decline in net income, for the quarter that ended on 31st’ May 2012. This decline amounts to a $549 million or the profit of just $1.17 per share while the company garnered $1.24 profits per share for the same quarter of fiscal 2011. On the other hand stock analysts predicted a profit of $1.37 a share.

This major player of sporting goods industry has not missed a step in the past 4 years and has almost always outperformed on Wall street expectations. It is not that Nike has never seen a fall in profits, its just that the company has shown stability and miffed the analyst expectations at all times except in 2009 when the profits saw a huge decline of 30%, after the company had to bear major corporate restructuring costs. So what was the reason behind this fresh downslide:

– Nike’s Umbro and Cole Haan units have become a serious liability with a combined loss of about $43 million. Nike has declared its intention to divest these units and focus on Jordan, Converse and Hurley brands.

– Company is facing higher product costs that severely affect its gross margins.

– Nike’s quarterly report shows a rise of 12% in selling and administrative expenses and are now costing the company a revenue of $2 billion.

– The demand creation spendings have also been up 23%. Nike is furnishing marketing support for major product releases in the European Football Championships and the Summer Olympics.

The company is a favorite of many analysts who enjoy Nike’s consistency in showing results therefore we still believe Nike will steer its wagon in the right direction and once again exceed expectations for the upcoming quarter.

LEAVE A COMMENT


Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted for being a sophisticated and loyal reader.

Welcome in the new year by signing up up for ValueWalkPremium today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 1/31/2019 or after next 30 23 subscribers take advantage whichever comes first – please do not share this discount with others

 

0