Nike’s (NKE-1.43%) turnaround plan is beginning to show results, thanks to a renewed focus on sports, its new CEO Elliott Hill said while unveiling better-than-expected fiscal third-quarter earnings.
The company posted $11.27 billion in revenue and 54 cents per share in profit, beating analysts’ consensus forecasts of $11.01 billion and 29 cents, respectively. The stock rose almost 3% in after-hours trading.
“The progress we’ve made reinforces my confidence that we are on the right path,” Hill said in a statement.
It was still a difficult quarter: Overall sales dropped 9% primarily due to a 17% plunge in China, amid new tariffs and softer consumer. Margins remain under pressure as the company works to clear old inventory and introduce new styles as Hill shifts its focus back to its athletic roots.
Hill, who has reorganized corporate teams by sport and secured major sponsorship deals with the NFL, NBA and WNBA, is refocusing the brand away from fashion. This strategy was prominently showcased on the world’s biggest sports stage – the Paris Olympics.
Nike has made significant strides, particularly with female customers. A new partnership with Kim Kardashian’s Skims brand aims to expand Nike’s appeal to women and compete with brands like Lululemon (LULU-1.85%) and Alo Yoga.
Despite these moves, analysts still expect a sales decline for the current quarter, driven by multiple factors, including the departure of top strategy and communications executives, Bloomberg reported.
Since Nike’s last earnings report in December, it’s faced additional pressure from Donald Trump’s trade war. The new 20% U.S. tariff on goods imported from China affects about 24% of Nike’s suppliers, which could hurt margins if Nike can’t offset the costs or raise prices. Retailers including Costco and Walmart have demanded that Chinese suppliers absorb the tariffs.
Weaker consumer sentiment has slowed discretionary spending, affecting demand for apparel and footwear. Nike’s largest brand partner, Foot Locker (FL-2.30%), has blamed the shoemaker for its declining sales, citing the effects of sneaker markdowns.
“Product innovation should be front and center” of the company’s turnaround efforts, Ram Reddy, CTO at Nagarro, a global solutions provider for large companies, told Quartz in an email. Reddy is a former footwear executive.
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