Earnings Preview: Nike faces higher costs

December 18, 2012

NEW YORK (AP) -- Nike Inc.'s fiscal second-quarter net income is expected to be flat on higher revenue as the world's largest athletic shoe and clothing company deals with rising costs combined with weakness in Western Europe and a slowdown in China. Nike reports after the market closes on Thursday.

WHAT TO WATCH FOR: Like most consumer product makers, Nike Inc. faces rising costs for packaging, fuel and other raw materials. In addition, the weak economy in Europe and softening in China is likely to offset stronger results in North America.

Analysts might also be looking for an update on Nike's plan to expand in Oregon, which the state has called a special legislative session to consider. Nike says the expansion will add 500 or more jobs and invest at least $150 million in Oregon.

Also during the quarter, Nike completed the sale of its Cole Haan and Umbro brands, which it had been trying to sell to focus on its core brands.

WHY IT MATTERS: Nike's results give insight into challenges facing the retail industry and also provide a glimpse at how willing consumers worldwide are to spend their money, which is key to an economic recovery.

WHAT'S EXPECTED: Analysts polled by FactSet, on average, expect Nike will earn $1 per share on revenue of $6 billion for the June-August quarter.

LAST YEAR'S QUARTER: In the second quarter last year, net income totaled $1 per share on revenue of $5.63 billion.