Nike plans to trim work force 6.8 percent reduction comes as earnings slide

Apparel

March 19, 1998|By BLOOMBERG NEWS

BEAVERTON, Ore. -- Nike Inc. said its fiscal third-quarter earnings fell 69 percent, as expected, and that it plans to take a fourth-quarter charge of $125 million to $175 million and fire 1,600 workers, or 6.8 percent of its staff.

Earnings before the charge fell to $73.1 million, or 25 cents a diluted share, from $237.1 million or 80 cents a share a year ago.

The company was expected to earn 25 cents a share, according to analysts surveyed by IBES International Inc.

Nike warned in February that earnings would fall and that it planned an unspecified charge because of declining orders from Asian retailers and markdowns on shoes in the United States.

The company, which warned about slowing sales since September, has said it doesn't expect improvement until later this year.

"Nike's having a bad quarter. It looks to me like the road to recovery has a lot of potholes. I had expected sales to be more even with last year with all of the inventory moving through," said Tony Russ, an analyst with Laidlaw Securities.

Nike shares rose $1.375 to close at $45.875 yesterday. Nike shares gained early in the day, amid speculation the earnings report would fully disclose the company's inventory problems and cost-reduction plans, said analysts.

The world's largest seller of sneakers said Feb. 25 that it expected third-quarter earnings of 24 cents to 28 cents a diluted share. At the time the company was expected to earn 39 cents, according to analysts surveyed by IBES.

The company said the job cuts will take place in its international operations. Nike currently has about 13,000 employees in the United States and 23,600 workers worldwide, including its subsidiaries.

Nike told workers last week that it will cut 450 people, or 3.5 percent of its U.S. work force. About 250 of the jobs were cut at Nike's headquarters in Beaverton. Another 200 will be eliminated at other U.S. locations.

The company also said its excess inventory rose 43 percent to $1.57 billion from $1.09 billion a year ago. In the second quarter, inventory rose to $1.45 billion from $981.1 billion.

Pub Date: 3/19/98

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