Nike ends its sales skid for now, a sign its turnaround is taking hold

Nike on Tuesday reported its first quarterly sales increase in six quarters, a sign of progress in the company’s turnaround effort.

The sportswear company said sales in the three-month period that ended Aug. 31 increased 1% to $11.7 billion. Wall Street had expected a 5% sales decrease.

Nike’s shares were up 4% in after-hours trading roughly two hours after the report, even though the company’s quarterly profits fell 31% to $727 million.

Tuesday’s earnings report comes on the heels of a reorganization aimed at renewing the company’s focus on sports. It backs up executives’ continued bullish comments that the company is getting back on track.

In recent years, Nike flooded the market with retro sneakers and focused on sales in its stores and on its website, moves that ultimately faltered, sending sales downward for five consecutive quarters — a rare, prolonged skid for Oregon’s biggest company.

Since he started work nearly a year ago, Nike CEO Elliott Hill has worked to unwind those two strategies.

Tuesday’s earnings report shows improvement in a few core parts of Nike’s operations.

Nike’s running business increased 20% in the quarter, the company’s legacy category, but one where it gave up market share in recent years. Nike also touted gains in North America, the company’s largest sales territory, and its wholesale business.

But the rebound in running is the most instructive, Hill told stock analysts on Tuesday.

While previously organized around making products for men, women and kids, Nike once again is organized around making products for specific sports.

Running was the first product category to benefit from the new approach, and Hill said it’s already enabled the development of better products. He called the gains in running an “early window” into what he expects in other product categories.

But challenges remain, Hill said, including Nike’s performance in its Converse subsidiary, its sportswear business and in China. The sportswear business includes the Nike Dunk and other retro sneakers that the company relied on for sales in recent years, but which have become less popular.

“We’re in the early stages, and our comeback will take time, and our progress won’t be linear,” Hill said.

Tariffs remain a significant financial headwind for Nike. The company makes most of its products in countries now subject to steep import taxes.

Three months ago, Nike Chief Financial Officer Matthew Friend told stock analysts Nike estimated tariffs amounted to $1 billion in annual new costs. On Tuesday, he said that’s increased to $1.5 billion because of additional tariffs. Some of the cost, Nike has said, will be passed along to consumers.

Friend said Nike expects sales will be down in the low single digits in the current fiscal quarter, which ends on Nov. 30, partially because of “cautious” consumer behavior in the face of new tariffs.

Looking further ahead, Friend said Nike’s spring orders are up and Nike expects its wholesale business, which accounted for 58% of sales last year, will return to growth in the fiscal year that ends May 31.