SEATTLE, Mar 19: Nike Inc said on Wednesday its earnings fell 69 per cent in the latest quarter because of economic woes in the Asia-Pacific region and an over supply of product in the United States, its biggest market.The athletic shoe and apparel company also said it planned to eliminate 1,600 jobs, or 7 per cent of its worldwide work force, and take a restructuring charge of $ 125 million to $ 175 million in the fourth quarter because of what it called a "difficult short-term market in the U.S. And Asia Pacific."
Nike said it earned $ 73.1 million, or 25 cents a diluted share, in its third quarter ended February 28, down from $ 237.1 million, or 80 cents a share, a year earlier.
The earnings were in line with a forecast the company issued late last month. Sales fell 8 per cent to $2.22 billion from $ 2.42 billion.
"The actions we announce today -- as difficult as they are to undertake as they impact our human assets -- will result in a leaner and more competitive Nike as we move into fiscal 1999,"Nike Chairman Philip Knight said in a statement.
"Our explosive growth in the three years prior to this one caused us to dramatically increase our work force from 9,500 to almost 22,000 employees at the end of fiscal 1997."
Analysts said the results and restructuring plan were in line with expectations, but they saw no quick turnaround for the marketing giant. "They've got to work through all these issues, primarily inventories and slowing demand," said Diane Daggatt of Dain Rauscher. "An upturn could start in the spring of '99."
Nike said worldwide orders for athletic footwear and apparel for delivery between March and July 1998 totaled $ 4 billion, down 9 per cent from a year earlier. Orders fell 13 per cent in the United States and 34 per cent in Asia.
In a conference call with analysts, Knight said the outlook for Asia remained uncertain, but he said he saw no need for a "major redesign" of strategy.
"This business is one of some cycles," he said. "If you miss it just a little bit you're goingto get burnt." Nike President Tom Clarke said he expected a year of "steady improvement" in the US market, with positive comparisons possible by the spring of 1999.
"The big question will be Asia," said analyst Jennifer Black Groves of Black & Co. in Portland, Ore. "At some point we know Asia will turn the corner."Nike said it had $ 265 million in Asian inventories, up $ 78 million from a year earlier, and executives did not expect the figure to be normalised until the end of calendar 1998.
The company also is struggling with a strong US currency that could trim 2 to 3 per cent off gross margin dollars in fiscal 1998, Clarke said.But he and other Nike executives said they remained optimistic about Asia in the long term, with Japan still seen as a $ 1 billion market by 2002, up from $ 600 million currently.
And while Nike is cutting net expenses by about $ 100 million next year, it will continue to invest in selected areas, such as promotion for soccer's World Cup and the planned opening of 43 retailoutlets around the world in fiscal 1999, making a total of about 150.The new stores will include 40 Nike factory outlet locations and three Nike Town showcases including the first one outside the United States in Berlin, scheduled to open in late fiscal 1999.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
