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," Blair said during a conference call with analysts after results were released.

Mark Parker, Nike president and chief executive, 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 (euro5.25 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.

Overall, Shanley said Nike performed as expected.

"There were no real surprises, and that's probably what's causing some disappointment," Shanley said, noting that after hours trading saw a decline in share prices.

Shares of Nike fell 62 cents to close at $83.63 on the New York Stock Exchange, and slid $2.39, or 2.9 percent, to $81.24 in aftermarket electronic activity.