Thursday, March 20, 2008

Nike How Did You Do It?

Nike (NKE) swooshed out and reported Q3 results. Revenues were up 16%. Cost of goods sold grew by only 14% and therefore margins are up 18%. Hey that’s pretty good. Commendable even when costs grow more slowly than revenues the shareholders win.

But wait a second. In the press release there was scant mention of this triumph. Also no mention if this was sustainable into the near future. One passing sentence was attributable to revenues reading “Changes in currency exchange rates increased revenue growth by 6 percentage points for the quarter” but what about cost of goods sold most of which is surely offshore and should also have a similar foreign exchange impact. Nary a word on that point. Hmmm

The press release went on to discuss how they were growing and leveraging platforms. (Seems all retail and consumer goods companies have platforms but not product lines) The press release was rather fluffy and did not satisfy an investor who likes to look at the why and how within the numbers. As a matter of fact no real commentary about markets or any other numbers.

Nike you are tracking $20 Billion in annual sales. You are a $33 billion market cap enterprise. Just saying your margin is up a little bit no longer satisfies. Does management understand the ramifications of a non financially oriented earnings release?