Nike Inc. is bullish about athletic footwear and apparel stocks — its own, that is.
This story first appeared in the September 23, 2008 issue of WWD. Subscribe Today.
The Beaverton, Ore.-based athleticwear giant said it would continue to buy back its own shares and put a new four-year, $5 billion program in place to purchase Class B common stock. The initiative will take over when the current $3 billion share repurchase program, approved in June 2006, is wrapped up. As of July 28, when Nike filed its annual report with the Securities and Exchange Commission, the firm had repurchased 38.6 million of its shares for $2.1 billion. The authorization will end once the $3 billion is spent or it expires in June 2010.
“Over the past 10 years, Nike has returned $5.5 billion to shareholders through the repurchase of more than 157 million shares,” said Mark Parker, president and chief executive officer. “This new share repurchase program demonstrates our continued confidence in Nike’s long-term growth prospects and financial strength.”
At the end of August, Nike had about 492.4 million Class B shares outstanding.
Analysts praised the buyback program, particularly given the tumult on Wall Street.
“This could be a big catalyst for the stock in this environment,” Citigroup analyst Kate McShane said. “It demonstrates the strength of Nike’s balance sheet, the confidence it has in its business and should further improve the company’s already attractive [return on invested capital].”
Marie Driscoll, retail analyst at Standard & Poor’s Equity Research, saw the repurchase as “providing support to the shares in a volatile market.”
However, Driscoll lowered her first-quarter earnings estimate to 95 cents a share from 99 cents. Last year, first-quarter earnings were $1.12. Nike will report results for the quarter after the market closes on Wednesday.
“We see stable margins, but expect the [foreign exchange] benefits Nike has enjoyed in the past two years will now provide a headwind,” she said.
Nike shares fell 67 cents, or 1.1 percent, Monday to close at $63.03.