By Juveria Tabassum and Nicholas P. Brown
(Reuters) -Nike on Tuesday reported a surprise rise in first-quarter revenue and beat expectations for quarterly profit as the sportswear giant rebuilds its presence at wholesalers and CEO Elliott Hill’s turnaround efforts take hold.
But executives offered cautious comments about the pace of improvement. Shares rose 1.5%.
“Nike beat the low bar set for EPS and showed some wholesale strength, but the underlying fundamentals are still shaky. DTC weakness, margin pressure, and China softness are flashing yellow lights,” said David Bartosiak, stock strategist at Zacks Investment Research.
The company’s first-quarter revenue rose 1% on a reported basis to $11.72 billion. Analysts had expected a fall of 5.1% to $11 billion, according to data compiled by LSEG.
Nike, for years synonymous with sports culture, is trying to rediscover its identity after a string of weak quarters.
It has lost market share to younger rivals such as On and Deckers’ Hoka, which are increasingly seen as more exciting, while demand in major markets – especially China – has been choppy.
The company, which makes nearly all its shoes in countries hit with steep tariffs under U.S. President Donald Trump, faces about $1 billion in costs from the levies, according to projections it shared in June.
CEO Hill, who took the reins last year, has vowed to refocus the brand around core sports like running, and to producing the kind of cutting-edge products the company had been known for.
“We still have work ahead to get all sports, geographies, and channels on a similar path as we manage a dynamic operating environment,” Hill said in a statement.
CFO Matthew Friend said “progress will not be linear as dimensions of our business recover on different timelines”.
“While we navigate several external headwinds, our teams are focused on executing against what we can control.”
Investors have also been closely watching the companies efforts to trim inventories. For the first quarter, it reported inventories down about 2% year-over-year.
The company’s gross margin for the quarter ended August 31 decreased 320 basis points to 42.2%, compared with a 440-basis-point fall in the preceding three-month period.
Nike also launched its much anticipated women’s athleisure line NikeSkims in partnership with Kim Kardashian’s brand this month, as it takes on competitors such as Lululemon.
It reported first-quarter earnings per share of 49 cents, compared with analysts’ average estimate of 27 cents.
On a currency neutral basis, revenue fell about 1% for the first quarter.
(Reporting by Juveria Tabassum in Bengaluru and Nicholas P. Brown in New York; Editing by Devika Syamnath)
