Nike shares fall amidst dispute
By Hanah Cho
Los Angeles Times
As Wall Street reacted negatively yesterday to news that Nike Inc.'s ongoing spat with its biggest customer was hurting future orders, analysts said the athletic shoemaker and Foot Locker Inc. should put a sock in it and make up.
Associated Press
Shares of Nike stock fell $3.85, or 6.8 percent, to close at $53.08 on the New York Stock Exchange yesterday, one day after the world's largest shoemaker said Foot Locker was largely to blame for a drop in U.S. orders for footwear and apparel for delivery between June and November. Orders were 10 percent lower than a year earlier.
A window shopper in Beverly Hills, Calif., checks out Niketown's latest products. Nike Inc. reported an 18 percent jump in fourth-quarter income, but the results narrowly missed Wall Street forecasts.
The dip refocused attention on the chilly relations between Beaverton, Ore.-based Nike and the New York-based footwear retail chain. That partnership took a bad turn last year when Foot Locker decided to sell less expensive Nike items, scaling back stocks of high-end shoes selling for more than $120 a pair. Nike, in response, stopped supplying Foot Locker with such popular sneakers as Jordan IX. Some analysts say it's time for Nike and Foot Locker to mend their rift.
"They're clearly joined at the hips in terms of overall performance," said John Shanley, a Wells Fargo Securities analyst, who reiterated a "hold" rating on Nike's stock yeserday. "I think most in the investment community would encourage both companies to work this out."
Also yesterday, a Merrill Lynch analyst downgraded Nike's stock to "neutral" from "buy."
"Although it's premature to say the Foot Locker relationship is getting materially worse, it doesn't appear to be getting better, raising the specter of more negative news flow" said Virginia Genereux, who cut her fiscal 2004 earnings estimate by 5 cents to $3.18.
In a conference call with analysts after the markets closed Thursday, Nike's co-president, Charles Denson, said that footwear orders from retailers other than Foot Locker were up by 3 percent to 4 percent for delivery between June and November. The company didn't reveal how much Foot Locker ordered or by what percentage the retailer's order was down compared to last year. Foot Locker said in a recent Securities and Exchange filing that 32 percent to 38 percent of its purchases this year was expected to be from Nike, down from 44 percent last year.
Nike said that worldwide orders for all products jumped 4.4 percent to $4.9 billion.
The company said that in the fourth quarter ended May 31, sales rose 11 percent to $3 billion, while U.S. sales of athletic shoes declined 3 percent.
Quarterly net income climbed 18 percent to $246.2 million, or 92 cents a share, compared with $208.4 million, or 77 cents, in the same period a year ago.
Nike executives said they remained optimistic about a decision to redirect distribution of its high-end footwear, focusing more on retailers other than Foot Locker.
Denson said the company's future orders don't include upcoming products tied to recent endorsements of this year's No. 1 NBA draft pick, LeBron James, and Los Angeles Laker Kobe Bryant.
Analysts say Wall Street was surprised at the effect Foot Locker had on Nike's future orders.
Correction: Shares of Nike stock fell $3.85, or 6.8 percent, to $53.08. A previous version of this story gave incorrect numbers.
