Slowing China Affects Nike’s Profits
For the first time in three years, Nike Inc. reported its earnings for its fiscal 2013 first quarter ended August 31, 2012 had dipped 12 per cent, spurred by declining orders from China, prompting shares to immediately tumble on Thursday.
At 5:32 p.m. in New York, the world's largest sporting-goods company dropped 2.2 per cent to $93.88, after shaking off as much 5.3 percent after the company issued its report after markets closing.
"The (Chinese) consumer is becoming more discerning and sophisticated. At the same time the economy seems to be slowing, creating short-time challenges for retailers," Charlie Denson, president for the Nike brand, said on a conference call with analysts.
"It's a natural evolution we've seen in many markets, so we're not surprised," he said.
The company had been selling products in China at marked down prices to clear shelves of unfavorable merchandise, but ultimately was hurting demand for new products. Future orders from China had declined 6 per cent, Bloomberg reported.
China's economy "appears to be slowing, creating a short-term impact to any business operating there," Mr Denson, president of the Nike brand, said on a conference call with analysts. He did not say when it would improve.
"The futures numbers are what's most important and when you've got a negative China number and deceleration in global future numbers, that's what's driving the stock down," analyst Camilo Lyon said in Bloomberg News.
Nike raked in $567 million in the quarter, down 12 per cent from the same period a year ago. On a per share basis, however, the sporting-goods company made $1.23, still above over consensus estimate of $1.12. Still it was a decline compared from the $1.36 a year earlier.
Despite the fall in net income, the company's revenue jumped 10 per cent to $6.7 billion in a currency neutral-basis, also above the $6.44 billion estimate.
"There are some very real pressures in this world, and in this market, that even a company with the size and sophistication of Nike can't avoid," Mr Lyon said.