BEAVERTON, Oregon -- Nike Inc., the world's largest maker of athletic shoes and clothing, said yesterday that its fiscal second-quarter profit dropped 51 percent as the National Basketball Association's lockout hurt sales.
Net income fell to $68.9 million, or 24 cents a share, from $141.1 million, or 48 cents, in the corresponding period a year earlier. Cost cuts helped Nike beat by 2 cents the average estimate of analysts polled by First Call Corp. for the quarter that ended Nov. 30.
The lack of an NBA professional basketball season has slowed demand for sneakers and clothing such as those touted by star Michael Jordan. Basketball shoes and clothes in the United States account for about 15 percent of Nike's sales.
"Nike is synonymous with Air Jordan," said Robert Izmirlian, analyst with Standard & Poor's Corp. who rates the stock "sell." "If fans get disappointed with the players, it dampens interest in sales."
Nike is expected to earn $1.55 a share for the year, the average estimate of First Call.
Efforts to reduce expenses offset less-than-expected second-quarter revenue of $1.91 billion, which fell 15 percent from $2.26 billion. Nike reduced inventory 17 percent, reducing storage costs.
"They've done a good job of cost control," said analyst Shawn Milne at Hambrecht & Quist, who rates the stock "hold."
Beaverton-based Nike, which has almost half of the U.S. athletic shoe market, also said total orders placed for future delivery fell 10 percent to $3.8 billion. Futures orders are a key indicator for gauging demand for shoes.
Nike's results have also been hurt by recessions in Asia, where it gets 13 percent of sales, and a shift by U.S. consumers to hiking boots and dressier shoes.
In the United States, shoe revenue fell 15 percent to $665.9 million, while clothing sales fell 13 percent to $365 million.
The company remains cautious about the U.S. market because of weak clothing sales at stores and uncertainty about the NBA's season, said Chairman and Chief Executive Officer Philip Knight.
"Basketball is a real centerpiece in the footwear industry at this time of year," said President Thomas Clarke. "That has been really hurting us."
The NBA locked out its players 5 1/2 months ago in an effort to get a collective-bargaining agreement. There's growing sentiment among the league and players that the season will be scrapped.
Revenue in Nike's Asia Pacific region fell 46 percent to $196.9 million, while futures orders fell 37 percent.
"We're optimistic that our business has stabilized after a difficult 12-month period," Knight said. The earnings report was released after the close of trading. On the New York Stock Exchange, shares of Nike closed at $41.50, down 37.5 cents.
Pub Date: 12/18/98