Nike gives cautious North American outlook; profits jump

[NEW YORK] Nike reported solidly higher third-quarter earnings Tuesday, but warned a tough North American selling environment would crimp profit margins.

The sports apparel and sneaker giant scored profits of US$1.1 billion for the quarter ending February 28, up 20 per cent from the year-ago period.

Revenues came in at US$8.43 billion, up five per cent from the year-earlier period, but a bit below the US$8.47 billion expected by analysts.

Gross margins contracted by 140 basis, due in part to greater discounting of merchandise.

During a conference call with analysts, Nike chief financial officer Andrew Campion described the North American retail market as "not in a steady state" as the rise of e-commerce continues to disrupt the market, leading to a glut of merchandise that depresses prices.

"We're going to be remain tight with respect to supply that we are putting into the North American market in the short-term," Mr Campion said.

Mr Campion described business conditions as more favourable in other markets, including China, where the sports giant is investing heavily.

The number of marathons in China has increased by 500 per cent in five years and Chinese authorities have forecast a sports market valued at US$850 billion by 2025.

Nike shares tumbled 3.5 per cent in after-hours trade to US$55.99. The results were released after the market closed Tuesday.

AFP