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Nike Profit Falls in Third Quarter

Excluding $240.7 impairment charge, firm beat estimates.

Nike Inc. handily beat third-quarter earnings estimates, excluding a $240.7 million impairment charge associated with its Umbro acquisition, but is preparing for shrinking global demand.


With futures orders down 10 percent to $6.5 billion for the fourth quarter, the active giant warned of further layoffs and restructuring charges of $175 million to $225 million in its fiscal fourth quarter.

For the three months ended Feb. 28, the Beaverton, Ore.-based firm’s earnings fell 47.4 percent to $243.8 million, or 50 cents a diluted share, compared with $463.8 million, or 94 cents, in the third quarter of fiscal 2008.

Sales for the quarter dipped 2.3 percent to $4.44 billion from $4.54 billion. Excluding currency exchange rate changes, revenue would have increased 2 percent, with footwear strength balancing weakness in apparel.

Excluding the noncash charge related to the impairment of goodwill of Umbro, earnings would have been up 4 percent to $484.5 million, or 99 cents a share. Analysts’ estimates were 79 cents a share.

“We don’t have to wait until after the economy recovers,” said Nike president and chief executive officer Mark Parker on an after-hours earnings call Wednesday. “We’re able to build a better company, drive cost savings into the business and reinvest in opportunities…to put us in a position to accelerate our strategic vision rather than reinvent it.”

Regional performance for the quarter was varied for the company. In the U.S., Nike sales increased 3 percent to $1.61 billion, with a rise in footwear sales offsetting declines in apparel and equipment. In the Asia-Pacific region, sales climbed 8 percent to $806.9 million, with increases across all categories. But sales in Europe and the Middle East fell 14.5 percent to $1.19 billion, and sales in the Americas region declined 5 percent to $245.4 million.

Sales for the company’s “other businesses,” including Cole Haan, Converse and Umbro, inched up 0.8 percent to $592.2 million. Converse led the way with 30-plus percent growth, while Cole Haan is feeling the economy’s impact, said Parker, who said Umbro will require more work — part of why Nike took an impairment charge related to the brand.