Nike to raise prices on sneakers in 2012 – blame the cost of oil and gas prices


NEW YORK — Nike plans to raise the prices on its shoes and sports clothing markedly in 2012 to cope with the rising costs of oil, cotton and transportation that are hurting its profitability. The shares in the world’s largest athletic shoe and clothing maker plunged 7 percent on fears that already stretched margins will come under even greater pressure this year and next. It reported a lower-than-expected quarterly profit on Thursday, hurt by rising production costs.

The company expects margin pressures to persist this year, intensifying in the current quarter.

“This is evidence that rising input costs are hurting Nike’s profit,” said Giri Cherukuri, a portfolio manager with OakBrook Investments, which owns Nike shares. “Nike’s margins will be under pressure for the rest of the year.”

To contend with that, Nike executives said the company would ramp up and broaden its price increases.

The company said there had been some product shortages and that suppliers would increase their capacity.

Nike forecast its gross margin during the current quarter will be 3 percentage points below year-earlier levels, but that pressure on margins would ease later in the year as price increases kick in.

“Beginning in spring 2012, we’ll take more significant price increases across a broader range of styles,” Chief Financial Officer Don Blair said on a conference call.

Blair said on the call it was too early to know how the crisis in Japan might affect its business in that country, which accounted for 3.8 percent of third-quarter sales.

Orders for Nike brand shoes and apparel scheduled for delivery from March through July 2011 totaled $7.9 billion.

By region, revenue in Nike’s largest market, North America, increased 9 percent to $1.84 billion, while sales in emerging markets and greater China rose 19 percent and 21 percent, respectively. Japan was the only market where sales fell, sliding 8 percent.

Source: MSNBC


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