WASHINGTON COUNTY (dpa-AFX) - Nike Inc. (NKE), the world's largest maker of athletic shoes and apparel, said Thursday after the markets closed that its first quarter profit fell 12% from last year, as lower gross margin, increased SG&A spending and a higher effective tax rate more than offset a 10% increase in revenue.
However, the company's quarterly earnings per share came in above analysts' expectations as did its quarterly revenue.
Worldwide future orders for Nike brand athletic footwear and apparel, scheduled for delivery from September 2012 through January 2013, rose 6% from last year to $8.9 billion. Future orders rose 13% in North America, but fell 5% in Greater China.
Nike shares are currently losing 1.83% in after hours trading after closing the day's regular trading session at $96.00, up 51 cents. The shares trade in a 52-week range of $81.01 to $114.81.
The company has managed to increase sales in North America, China and emerging markets in recent quarters, but its gross margin continues to be hurt by higher product costs.
First quarter revenue from North America, the company's largest market, surged 23% year-over-year to $2.7 billion, while revenue for Western Europe fell 5% to $1.2 billion and Central and Eastern Europe revenue grew 2% to $342 million.
Revenue for Greater China rose 8% to $572 million in the first quarter, while Japan revenue slipped 6% to $183 million. First quarter revenue from emerging markets climbed 8% to $867 million.
Revenue from the company's other businesses, which includes Converse Inc., Hurley International LLC and Nke Golf, increased 9% to $635 million in the first quarter.
Nike said May that it plans to divest its Cole Haan and Umbro businesses to sharpen its focus on driving growth in the Nike, Jordan, Converse and Hurley brands. The process of divesting the two businesses is expected to be complete by the end of the company's fiscal 2013. First quarter revenue from those businesses grew 4% to $195 million in the first quarter.
Gross margins for the quarter fell to 43.5% from 44.3% a year ago, due mainly to higher input costs as well as a shift in the company's mix to lower margin businesses within the Nike Brand and the conversion of the China market to direct distribution for Converse.
Selling and administrative expenses for the first quarter rose 16% to $2.2 billion, with demand creation expenses up 29% due to marketing support for key product initiatives, the European Football Championships and the Summer Olympics.
Operating overhead expenses increased 12% to $1.3 billion due to additional investments made in the wholesale business to support growth initiatives and higher direct to consumer costs from the addition of new stores over the last year.
For the first quarter ended August 31, 2012, the Beaverton, Oregon-based company reported net income of $567 million or $1.23 per share, compared to $645 million or $1.36 per share for the year-ago quarter.
On average, 16 analysts polled by Thomson Reuters expected the company to earn $1.12 per share for the first quarter.
Excluding businesses to be divested, pro-forma earnings per share for the first quarter would have been $1.27, compared to $1.39 in the prior year quarter.
Revenues for the first quarter rose 10% to $6.67 billion from $6.08 billion in the same quarter last year. Excluding changes in currency exchange rates, first quarter revenues grew 15% from a year earlier. Fourteen analysts had a consensus revenue estimate of $6.41 billion for the first quarter.
For the first quarter, footwear sales rose 11% to $3.7 billion, while apparel sales increased 10% to $1.8 billion and equipment sales grew 13% to $386 million.
During the first quarter, Nike repurchased 8.2 million shares for about $779 million as part of its four-year, $5 billion share repurchase program, approved by its board in September 2008. As of the end of the first quarter, the company has purchased a total of 58.5 million shares for about $4.9 billion under that program.
On September 19, the company said that its Board of Directors has approved a new four-year, $8 billion program to repurchase shares of the company's Class B common stock. During the fiscal second quarter, the company's current $5 billion share repurchase program was completed, and the new program commenced.
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