Nike Earnings: Margins SHRINK, Stock DROPS Like a Rock

Rising costs hurt S&P 500 (NYSE:SPY) component Nike Inc. (NYSE:NKE) in the fourth quarter as profit dropped from a year earlier. Nike designs and markets high-quality footwear, apparel, equipment, and accessory products throughout the world.

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Nike Inc. Earnings Cheat Sheet

Results: Net income for the retail-apparel and shoes fell to $549 million ($1.17 per share) vs. $594 million ($1.23 per share) a year earlier. This is a decline of 7.6% from the year-earlier quarter.

Revenue: Rose 12.2% to $6.47 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Nike Inc. fell short of the mean analyst estimate of $1.37 per share. Analysts were expecting revenue of $6.51 billion.

Quoting Management: “Fiscal year 2012 demonstrated NIKE, Inc.’s greatest strength – innovation. We delivered an amazing number of game-changing products and services that drove record revenue growth,” said Mark Parker, President and CEO, NIKE, Inc. “We also delivered solid profit growth for the year despite some headwinds in a challenging global economy, which will continue into the next year. That said, NIKE is well positioned and will remain aggressive, flexible and laser-focused on the high-growth opportunities. That’s how we continue to deliver long-term profitable growth for our shareholders.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 15.4%, with the biggest boost coming in the second quarter when revenue rose 18.4% from the year earlier quarter.

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the third quarter, net income rose 7.1% from the year earlier, while the figure increased 2.6% in the second quarter, 15.4% in the first quarter and 13.8% in the fourth quarter of the last fiscal year.

Last quarter was the fifth in a row that the company saw shrinking gross margins, as they fell 1.5 percentage points from the year-earlier quarter to 42.8%. Over that time, margins have contracted on average 2.4 percentage points per quarter on a year-over-year basis.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the third quarter, it topped the mark by 4 cents, and in the second quarter, it was ahead by 3 cents.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the first quarter of the next fiscal year is $1.35 per share, down from $1.47 ninety days ago. The average estimate hasn’t changed from $4.94 per share for the fiscal year.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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