(Adds comments from conference call and analysts, and background throughout.)
By Sharon Terlep and John Kell
Of DOW JONES NEWSWIRES
Nike Inc. (NKE) doesn't anticipate immediate relief from a global sales slump that sent revenue tumbling in the company's fiscal first-quarter.
Instead, the world's largest sportswear company will keep inventories lean and work to steal market share from weaker competitors as it waits out the tough economy.
Nike, which released its quarterly financial results on Tuesday, said profit inched up as savings from job cuts earlier this year offset a continued decline in sales. The company said it expects cost-cutting to dominate results for the near future.
"We are stable and we are staying healthy. Our inventory levels are lean and well-managed," Charlie Denson, president of the Nike brand, said on a conference call with analysts.
Shares rose 4% to $62.58 in late trading Tuesday after finishing up $1.09 at $60.09 in 4 p.m. composite trading on the New York Stock Exchange. The stock has been climbing from its three-year low of $38.24 set in March.
Nike's sales were down across its regions and worldwide future orders, an indicator of growth based on estimates of product orders, slid 6% to $6.2 billion.
In another threat, the company faces tough competition from growing rival Under Armour Inc. (UA), winning over shoppers looking for functional - rather than purely stylish - athletic wear.
Still, Nike's worldwide brand appeal has helped the company steal customers from struggling rivals such as Reebok, New Balance and K-Swiss Inc. (KSWS).
"They operate better than their competitors, but their competitors are a disaster right now," said Sterne Agee analyst Sam Poser. "Right now, it's a 'We shall see type of thing.' "
The company expects a bump in sales next year ahead of the 2010 World Cup in South Africa.
Nike reported earnings of $513 million, or $1.04 a share, for the fiscal quarter ended Aug. 31, up from $510.5 million, or $1.03 a share, a year earlier. Revenue slid 12% to $4.80 billion. Excluding changes in currency rates, the drop would have been 7%, the company said.
Analysts surveyed by Thomson Reuters expected per-share earnings of 97 cents on revenue of $4.9 billion.
Gross margin fell one percentage point to 46.2%, hurt by unfavorable exchange rates and markdowns. Offsetting the margin decline was a 17% drop in overhead costs, partially due to higher spending last year around the Summer Olympics.
Revenue fell by a double-digit percentage rate in greater China and Western Europe, and posted its steepest decline of 33% in Central and Eastern Europe. Japan's revenue was essentially flat, while emerging markets revenue decreased 8%.
North America revenue decreased 5% to $1.76 billion, as athletic footwear fell 4% and U.S. apparel dropped 9%.
- By Sharon Terlep, Dow Jones Newswires; 248-204-5532; sharon.terlep@dowjones.com
- By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com