Nike’s trajectory improves on better-than-expected sales

For more finance coverage, subscribe to the Jing Finance newsletter for the latest news, business updates, global analysis, and trends shaping financial markets. Nike’s wholesale business and strength in North America powered the company’s latest quarterly sales above Wall Street’s expectations, showing that turnaround efforts at the world’s largest sportswear company are starting to deliver results. Sales fell 1% on a currency-neutral basis in the company’s most-recent quarter, a smaller drop than investors anticipated, according to a statement. Revenue in the period was $11.7 billion, higher than the $11 billion projected by analysts. Nike shares rose 0.9% in extended New York trading on Tuesday. The stock has dropped 7.8% so far this year through Tuesday’s close. From crisis to comeback? The results mark progress in Chief Executive Officer Elliott Hill’s push to reset Nike by clearing out old inventory and reorganizing its corporate structure, including replacing many top executives. Nike has suffered from a prolonged sales slump after previous management pulled back too aggressively from longstanding wholesale partners and overemphasized casual footwear over performance products such as running shoes. In the previous quarter, sales plummeted 11% on a currency-neutral basis, and Hill told investors in June that “it”s time to turn the page,” adding management expected results to improve from that low point. The latest quarter, which ended August 31, showed Hill’s efforts are paying off as wholesale revenue rose 5% on a currency-neutral basis to $6.8 billion, beating the average analyst estimate. However, Chief Financial Officer Matt Friend warned that “progress will not be linear” and some parts of the business may take longer to bounce back. Sales in the Greater China region remained weak, while the company’s Converse brand declined 28% in the quarter, adjusting for currencies. Rebuilding trust Nike’s comeback bid is pinned on refocusing product development and marketing on sports while rebuilding relationships with retailers. The company is returning to Amazon.com for the first time in six years, and its sneakers are back front-and-center at its close partner Foot Locker’s stores. These efforts have been hampered by U.S. tariffs and concerns over consumer discretionary spending. Nike has raised some prices and has said its costs will increase by $1 billion due to higher levies. The company said tariffs hurt gross margin, a measure of profitability. By Kim Bhasin

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Nike’s trajectory improves on better-than-expected sales