• Q1 net profit fractionally up at US$513m
  • Revenues down 12% to $4.8bn
  • Expenses cut by 17%

Sportswear giant Nike held steady with a first quarter net profit of US$513m, fractionally up on last year's figures, as cost-cutting made up for falling sales.

Revenues fell 12%, or 7% excluding currency effects, to $4.8bn, with markets in all parts of Europe suffering most during the economic downturn.

Revenues in North America fell 5% to $1.8bn, but western Europe was down 18% to $1.1bn, and central and eastern Europe plunged 33% to $286m.

Greater China revenues fell 16% to $416m, Japan was flat at $186m and emerging markets were down 8% to $422m. Sales for Nike's other businesses, including Cole Haan, Converse, Hurley International, Nike Golf and Umbro, declined 5% to $604m.

And the company said futures orders for the period to January 2010 were down 6% on last year at $6.2bn, with central and eastern Europe again hardest hit.

However, Nike said cost reductions had slashed selling, general and administration expenses by 17% to $1.55bn.

"We delivered a good start to the fiscal year," said company president and CEO Mark Parker.

"These results illustrate that the emotion of sports, combined with innovative product, strong brands and premium retail experiences, can make powerful connections to consumers, even in challenging times."

INSIGHT

There is, at first glance, little to get excited about in Nike's first quarter results. Revenues predictably down, futures orders lower as expected - so what?

But a relatively quiet set of results in a time of global economic doom and gloom is no bad thing, particularly when you can maintain your profitability when many about you are losing theirs.

Analysts seem to have shrugged off the marginally disappointing revenue performance - many were expecting something closer to $5bn - and fastened instead on that profit figure, with earnings per share as much as 7% up on the consensus.

For that Nike owes pretty much everything to an aggressive programme of cost-cutting, which sent SGA expenses crashing down by 17% - part of what CEO Mark Parker described as a "laser focus on operational excellence".

But the company also performed the neat trick of increasing its already formidable share of the crucial US footwear market, leaving its rivals trailing in its wake - and raising its prices into the bargain.

That combination of factors bodes well for Nike's prospects when that longed-for recovery hits the US (although it will probably have to wait a little longer for the rest of the world to catch up).

Or, as Parker put it: "We're on the right track, moving forward with confidence in hand and opportunity in mind."