Fitness financials: Nike's Q3 profit down 47 percent hit by goodwill charge, plus Dick's Sporting Goods

Nike’s Q3 profit down 47 percent hit by goodwill charge

Nike (NYSE: NKE) said its third-quarter profit fell 47 percent, hurt by higher costs, lower demand in Europe and charges related its acquisition of Umbro.

For the quarter ended Feb. 28, its net income slipped to $243.8 million, or $0.50 cents per share, compared with $463.8 million, or $0.92 per share, in the same period last year.

Nike took an after-tax goodwill charge of $240.7 million to reflect that the value of its investment in Umbro has declined. The company’s total sales and orders for future deliveries dropped because of the weak consumer market.

Excluding that charge, Nike’s net income would have risen 4 percent to $484.5 million, or $0.99 per share.

Nike’s revenue fell 2 percent to $4.4 billion. Excluding changes in currency exchange rates, the company estimated that revenue would have increased 2 percent.

During the third quarter, U.S. revenues increased 3 percent to $1.6 billion compared to the same period last year. U.S. footwear revenues increased 8 percent to $1.2 billion. Apparel revenues decreased 9 percent to $370.4 million. Equipment revenues decreased 2 percent to $74.4 million. Pre-tax income increased 2 percent to $357.0 million.

Revenues in the Asia Pacific region grew 8 percent to $806.9 million compared to $749.3 million a year ago. Revenues in the Americas region decreased 5 percent to $245.4 million from $257.2 million for the same quarter last year.

Third-quarter revenues for the European region decreased 14 percent to $1.2 billion compared to $1.4 billion for the same period last year.

Nike added that orders for products to be delivered through the spring and summer were 10 percent lower than in the same quarter last year.

Analysts initiate coverage of Dick’s Sporting Goods at ‘buy’

Analysts at Sterne Agee & Leach initiated coverage on Dick’s Sporting Goods with a “buy” rating, saying the company is well positioned to weather the economic downturn.

Analysts Sam Poser and Kenneth Stumphauzer wrote in a note that Dick’s Sporting Goods is likely to maintain earnings power despite declines in sales. Despite suffering as consumers limit their spending, the analysts said that Dick’s Sporting Goods’ reaction to the economic pressures, such as limiting store growth, tightening inventory and focusing on higher margin products will benefit them in the long term.

“We believe that changes in strategy and mix, even if caused by the current poor environment, are likely to be more a blessing than a curse,” they wrote.

After the news, shares of Dick’s Sporting Goods rose $0.76 to close at $13.82 on Mar. 17.

–Compiled by Wendy Geister

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