NEW YORK — Despite a 12 percent increase in U.S. apparel revenues, Nike Inc. on Wednesday posted third-quarter results that included a 1.3 percent decrease in net income.
This story first appeared in the March 20, 2003 issue of WWD. Subscribe Today.
For the three months ended Feb. 28, the company said income fell to $124.7 million, or 47 cents a diluted share, from $126.3 million, or 46 cents, in the year-ago period. Sales rose 6.2 percent to $2.4 billion from $2.26 billion.
Philip Knight, chairman and chief executive officer, said in a statement, “As expected, this quarter’s results reflect the growing strength of both our brand and our business around the globe. This quarter, our U.S. footwear business regained momentum in the marketplace as consumers thoroughly embraced our high-end performance product. Internationally, despite geopolitical uncertainty, our business continued to perform well.
“We continue to focus on profitability, as evidenced by another quarter of strong gross margin expansion. Overall, I am confident in our ability to achieve sustainable, profitable growth over the long term.”
Gross margins in the quarter picked up 160 basis points to 40.7 percent of sales from 39.1 percent in last year’s quarter.
Executives said during a conference call after the markets closed that the demand for apparel in the latest quarter has been the “strongest” in years. They also noted that revenues in the Asia Pacific region were driven by strong sales in Korea, China and Japan, mostly due to the marketing and brand recognition from last year’s sponsorship of soccer’s World Cup.
In the latest quarter, U.S. apparel sales rose 12 percent to $307 million, while athletic footwear revenues dipped by 1 percent to $761 million. Total revenues, including equipment sales, in the U.S. rose by 3 percent to $1.13 billion from $1.09 billion.
In Europe, apparel sales grew by 6 percent to $239 million, while footwear revenues were up by 7 percent to $363 million. Total revenues for the region, which includes the Mideast and Africa, rose by 8 percent to $646 million.
Asia Pacific saw the strongest gain in apparel sales, up by 16 percent to $116 million. Footwear revenues gained 17 percent to $186 million. Total sales were up in the region by 17 percent to $335 million.
In the Americas, apparel and footwear revenues declined, by 12 percent to $30 million and 2 percent to $69 million, respectively. Overall sales fell by 4 percent to $107 million in the region.
Nike also said that revenues from other operations — Nike Golf, Bauer Nike Hockey Inc., Cole Haan and Hurley International — grew 10 percent to $185 million.
Jeffrey Edelman, equity analyst at UBS Warburg, wrote in a research note earlier in the week that shares of Nike’s stock, in part, have “rebounded over the past few months in anticipation of a bottoming in its U.S. business.”
The leveling off is in good part attributable to a tug-of-war going on between Nike and Foot Locker over the former’s higher-priced athletic footwear which has resulted in lower orders to Nike.
Shares of Nike closed on Wednesday at $50.08, up $1.09, in trading on the New York Stock Exchange.
Footwear and apparel orders scheduled for delivery between March and July 2003 grew 5.8 percent to $4.2 billion versus last year.
At the end of the quarter, global inventories totaled $1.5 billion, up 6 percent from a year ago. Cash and short-term investments were $443 million versus $350 million last year.
For the nine months, income was cut in half, to $227.8 million, or 85 cents a diluted share, from $454.9 million, or $1.67, a year ago. Sales, however, added 6.9 percent, crossing the finish line at $7.71 billion from $7.21 billion in the first nine months of last year.