Earnings: Nike | ConAgra

Nike Reports Drop In Profit

BEAVERTON, Ore. - (AP) - Athletic gear maker Nike Inc. (NKE) reported a slip in quarterly income as heavy spending around the World Cup and the effects of higher raw materials costs ate into its sales and margins. The company also blamed an arbitration ruling involving Converse.

Nike's fiscal fourth-quarter net income fell 5 percent to $332.8 million, or $1.27 per share, from $349.5 million, or $1.30 per share, last year. Sales increased 8 percent from the same period last year.

Click here to visit FOXBusiness.com's Investing page.

Excluding a 12-cent per share charge for a $52.5 million settlement between its Converse subsidiary and a former licensee, Nike earnings would have been $1.39 per share — a penny off the estimate of $1.40 by analysts surveyed by Thomson Financial.

Analysts, however, were concerned about a larger than expected decline in gross margin, a measure of efficiency calculated as a percentage of remaining revenue after subtracting the cost of goods sold.

"The Converse settlement and World Cup spending wasn't the whole story," said Sara Hasan of McAdams Wright Ragen in Seattle.

Nike said gross margin declined to 43.8 percent from 45.2 percent, hurt by higher oil prices.

"We set prices in advance, so when you have price increases for oil or labor, it starts to move into our cost structure over time," Don Blair, Nike's chief financial officer, said during a conference call with analysts after results were released Tuesday.

Nike posted record sales of $15 billion for its fiscal year, up 9 percent from $13.7 billion the previous year. Profits jumped 15 percent to $1.4 billion for fiscal 2006 compared to $1.2 billion in 2005. Earnings per share grew 18 percent to $5.28 from $4.48 a year ago.

Mark Parker, Nike president and CEO, and Charlie Denson, Nike Brand president, joined Blair to tell analysts the company is working hard to build lagging sales in Japan, France and the United Kingdom. Those markets were offset by improvements in China and the United States, they said.

"We've doubled our business in China over the last two years to over $600 million," Parker said.

Overall, Nike reported future orders totaling $6.6 billion for delivery from June 2006 through November 2006, up 5 percent for the same period last year. Orders for the U.S. market, the single largest for Nike, were up 9 percent but increased only 1 percent for Europe.

"With forward orders in the European region up only 1 percent they clearly are losing some traction there, with Adidas saying their business is robust coming off the World Cup," said John Shanley of the Susquehanna Financial Group.

Shanley noted that Nike lost its lead in Japan in 2005 to Adidas, and has been struggling to get it back.

But Blair said the company had gained 2 points of market share in the United States over the last year, helped by a surge in the popularity of basketball shoes.

Click here to visit FOXBusiness.com's Investing page.

ConAgra Posts Profit Increase

CHICAGO (Reuters) - Packaged food company ConAgra Foods Inc. (CAG) Wednesday posted a 6.6 percent rise in quarterly profit as it cut costs, sold off some businesses, and stepped up marketing spending behind key brands.

The maker of Healthy Choice meals, Hebrew National hot dogs and Hunt's ketchup said it earned $108.5 million, or 21 cents per share, in the fiscal fourth quarter that ended May 28, compared with $101.8 million, or 20 cents per share, in the same period a year earlier.

Results in the latest period include net charges of 11 cents per share from restructuring costs and a gain on divestitures. The company sold its ham and seafood businesses during the quarter.

Excluding those items, fourth-quarter earnings per share were 32 cents, while earnings from continuing operations were 27 cents per share.

Net sales dipped 0.8 percent to $2.97 billion.

ConAgra is in the midst of a turnaround orchestrated by Gary Rodkin, who took over as chief executive last year. His first steps included cutting the dividend, selling some businesses, and boosting marketing spending behind top brands such as Egg Beaters egg substitutes and Pam cooking spray.

Looking ahead, the company expects to achieve its fiscal 2007 earnings goal of $1.12 to $1.17 per share, which includes a 2-cents-per-share benefit from stock buybacks. Analysts, on average, expected $1.17, according to Reuters Estimates.

Click here to visit FOXBusiness.com's Investing page.