New York (AFP) – Nike earnings released Tuesday were lifted by a hefty US tariff refund, but weak sales in China and a tepid forecast weighed on shares. The company, which has been in turnaround mode under a new CEO after a difficult stretch, estimated a tariff recovery of $986 million after the US Supreme Court threw out some of President Donald Trump’s tariffs. That sum accounted for most of Nike’s $1.1 billion profit in the quarter ending May 30 — about five times the earnings compared with the year-ago period. Revenues fell one percent to $11 billion, and shares sank two percent in after-hours trading.
“We are moving quickly…but this work will take time to scale and translate into consistent results,” said Elliot Hill, a longtime Nike executive who rejoined the company as CEO in October 2024. Executives reported a weakening in consumer activity across markets midway through the quarter, attributing the drop to affordability concerns as oil prices rose sharply with the US-Iran war. But company officials said sales had picked up in June, citing a lift from the World Cup, as well as the pullback in gasoline prices after the US-Iran memorandum of understanding on ending the war.
Chief Financial Officer Matthew Friend said the company still expects “flattish” profit over the next two quarters. Nike expects revenues in the upcoming quarter to be down “low-to-mid single-digits.” Hill has been trying to pivot Nike after the company’s shift towards direct selling allowed other brands like Hoka to amass market share with retailers. The company has also been beset in leading markets with excess inventory that has forced periodic rounds of heavy discounting.
Nike has faced especially acute problems in China, where there is intense competition from local brands. In the most recent quarter, revenues in Greater China fell 12 percent to $1.3 billion. Hill reiterated that the company was committed to China, saying the sports giant was working to strengthen local partnerships, including through local product development. “We have to be more premium and culturally relevant, and we have to lead with sport,” Hill said.
Neil Saunders, managing director of GlobalData, said sales drops in Greater China and the Europe-Middle East-Africa region were concerning, contributing to “the sense that Nike’s problems are more deep-seated than previously acknowledged and that, consequently, the turnaround is taking much longer than anticipated.” Saunders described a three percent rise in North America sales as more promising, but that the company’s cautious outlook “adds to the sense that full recovery remains elusive and a long way off.”
© 2024 AFP
