Sportswear giant Nike made a rare stumble in its fourth quarter as higher product and marketing costs took their toll on margins and offset the largely positive effects of higher sales, price increases and cost reduction initiatives.  

And the company admits that some of these headwinds are likely to linger.

"As I look at fiscal 2013, I expect persistent challenges along with big opportunity," president and CEO Mark Parker told analysts on an earnings call yesterday (29 June).

"We will see continued uncertainty in the global economy, commodities and labour costs will continue to fluctuate, currency pressures increase, especially in Europe and the emerging markets, and China's economy is expected to grow more slowly than we've seen over the past five years."

Indeed, future orders for footwear and apparel scheduled for delivery from June through November - an indicator of upcoming growth - rose 7% across the company as a whole, but are up 5% in China or by just 2% excluding currency changes.

Parker, however, remains convinced that "Nike is well positioned and will remain aggressive, flexible and laser-focused on the high-growth opportunities."

Among these are breakthrough innovations like its new Flyknit running shoes. "We delivered more game-changing innovation in a shorter window of time than ever before," Parker said, noting the digital products like the FuelBand movement-tracking wristband, the Lunar footwear technology, and the TurboSpeed suit for elite sprinters.

Nike, whose brands include Nike, Jordan, Converse and Hurley, said a number of factors combined to cut its fourth quarter gross margin by 150 basis points to 42.8%, and push profit down by 8% to $549m.

As well as higher product costs there was a restructuring charge, an "unanticipated customs assessment", and increased investments in its digital business. And so-called "demand creation expenses" which largely relate to marketing expenses and new product launches around events like the Euro 2012 football championships and the summer Olympics, jumped 23% to $760m.

Indeed, while revenues rose 12% to $6.5bn in the three months to 31 May, selling and administrative expenses grew at the same 12% rate to $2bn.

During the quarter, it was North America and China which really delivered the numbers. North America revenues increased 13%, with gains of 14% in footwear and 8% in apparel. While in China, currency-neutral revenue grew 14% with footwear advancing 21% and apparel up 3%.

The doom-laden eurozone saw more modest growth, with revenues in Western Europe edging up 2% in the quarter.

For the full year, net income increased 4% to $2.2bn or $4.73 per share. Gross margin dropped 220 basis points to 43.4%. Revenues were up 16% to $24.1bn, with wholesale revenues up 14% to $17.4bn and direct to consumer revenues jumping 21% to $3.5bn with a 13% hike in same-store sales.

Among the main challenges facing the firm in the year ahead is the ability to translate this top line growth to the bottom line.

As well as product pricing, efforts such as lean manufacturing and sourcing consolidation are seen as key to helping reduce product cost, along with supply chain efficiencies to cut air freight costs and improve on-time delivery.

"I told you we aim to be a $28bn to $30bn company by the end of fiscal 2015," Parker said. "I remain confident we'll achieve that goal."