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Nike 4Q loss after charge
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June 30, 1998: 6:22 p.m. ET
$129.9 million restructuring charge pulls sneaker maker into the red
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NEW YORK (CNNfn) - Nike Inc., the world's largest sneaker maker, reported a substantial fourth quarter loss Tuesday, reflecting slower sneaker sales, continued softness in Asia and restructuring charges.
The Beaverton, Ore.-based athletic shoe maker (NKE) lost $67.7 million, or 23 cents a share, which includes a pretax restructuring charge of $129.9 million. The charge lowered profits by $79.5 million, or 27 cents a share.
Excluding the charge, Nike said its net income was $11.8 million or 4 cents a share, compared to $155.8 million, or 52 cents a share in the prior year. Analysts were anticipating profits of 3 cents a share, according to First Call.
Revenue for the quarter ended May 31 fell 3 percent to $2.31 billion from $2.37 billion a year earlier.
"Fiscal 1998 was a year of turbulence for Nike," said Philip H. Knight, chairman and chief executive. "Historically, we have followed these difficult periods with strong rebounds that have surprised the marketplace, industry analysts and, to a degree, even ourselves.
"Even so, we face very significant challenges: the continuing effects of the Asian economic crisis, the responsibility to re-ignite excitement in the U.S. market, and the task of creating compelling product that exceeds consumers' expectations," he added.
Looking ahead
For fiscal 1999, Nike estimates that revenue will fall below 1998 full-year levels of $9.6 billion, said Robert Harold, interim chief financial officer.
Although profit margins (or profits as a percentage of revenue) are projected to increase for fiscal 1999, future orders indicate that revenue will be down, Harold said during a conference call with analysts.
"Our main goal for fiscal 1999 is to upgrade our organization in order to effectively meet these challenges," Knight said in a statement. "This evolution of the organization will enable us to focus on the abundant opportunities for profitable growth and position us for sustained growth in fiscal 2000 and beyond."
Nike reported worldwide futures orders for athletic footwear and apparel scheduled for delivery between June and November 1998 total $4.2 billion, 13 percent lower than such orders for the same period last year.
By region, future orders were down 11 percent across the United States, Europe increased 11 percent, Asia Pacific was down 54 percent and the Americas was down 15 percent.
Inventory problems improve
Top Nike officials acknowledged that financial conditions improved considerably in the latest year.
As a result of an ongoing inventory reduction program, Nike sold off nearly 2.9 million pairs of closed-out footwear in the fourth quarter and more than 10 million pairs for the year.
In the U.S., the company reduced older inventories to 1.6 million pairs from 2.8 million as of February 1998. In Europe, inventories were reduced to 600,000 from 800,000 at the beginning of the quarter.
But inventories are still 4 percent higher than year ago levels, said Harold, who appeared on the conference call with Knight and Nike President Tom Clarke.
U.S. athletic footwear revenues declined 11 percent to $854.6 million, compared to $956.7 million in the same period last year.
Nike said fourth quarter revenues in the Asia Pacific region declined 37 percent to $243.6 million. In constant dollars, regional revenues decreased 29 percent.
Revenues in Japan declined 46 percent in the quarter, reflecting continued weakness in consumer spending.
Nike said the restructuring charge covered costs associated with the reduction in the company's global workforce, lease abandonments, asset write-downs and other costs.
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