EARNINGS WARNING DROPS NIKE SHARES

Byline: Vicki M. Young

NEW YORK — Shares of Nike tumbled nearly 20 percent on the New York Stock Exchange Tuesday in the first day of trading after the company said third-quarter earnings per share would come in about one-third below earlier estimates.
The footwear and apparel giant said Monday after the market closed that earnings per share for the quarter ending Feb. 28 are likely to be between 34 cents and 38 cents, off from the previously stated company guidance of between 50 cents and 55 cents. The company held firm to its fourth-quarter projection of between 60 cents and 65 cents in EPS for the period that will end on May 31. The company also said that while it doesn’t expect to achieve its mid-teens EPS growth target, it does expect positive EPS growth for the full fiscal year.
Shares of the stock closed at $39.60, down $9.52, or 19.5 percent, for the day in New York Stock Exchange trading. In the past 52 weeks, Nike has traded as high as $60.06 and as low as $25.81.
Philip H. Knight, chairman and chief executive officer, in a statement attributed the shortfall to software problems connected to the implementation of a new supply and demand planning system.
Dennis Rosenberg, apparel and footwear analyst at Credit Suisse First Boston, wrote in a research note Tuesday that mismatched orders and production resulted in excess inventories in the U.S. of some footwear models and shortages of others. “Profitability will be reduced by lower sales, costs of liquidating excess inventory, and costs of air freighting product where shortages occurred,” he wrote. Credit Suisse was one of many investment banking firms that downgraded the stock. Others include WF Van Kasper and Merrill Lynch.
Knight added, “Nike’s business is healthy in every area except one. We are enjoying strong results in all of our international regions, and in U.S. apparel and equipment; however, our U.S. footwear business continues to pose challenges.”

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