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By Savyata Mishra
March 31 (Reuters) – Nike beat expectations for third-quarter earnings on Tuesday, as the sportswear giant’s turnaround efforts showed some signs of progress, particularly in its wholesale business, even as weakness in China and margin pressure persisted.
Under CEO Elliott Hill, Nike has pulled back promotions, stepped up product innovation and refocused on core franchises such as running as it tries to reset the business after years of excess inventory and uneven demand across North America and China.
“The work is not finished, but the direction is clear, our teams are moving with focus and urgency,” Hill said.
The sportswear retailer’s revenue was flat at $11.28 billion in the quarter ended February 28, but came in above analysts’ average estimate of a 0.3% drop to $11.24 billion, according to data compiled by LSEG.
It earned 35 cents per share, beating estimates of 28 cents.
But the turnaround remains uneven.
In the reported quarter, wholesale revenue jumped 5% to $6.5 billion, helped by stable sales in North America. But its direct-to-customer sales fell 4%, dragged by muted demand in Europe and China.
Shares of the company were down 3% after the bell. The stock has lost about 17% of its value in the last 12 months.
“For what it’s worth, the U.S. has been the area Nike has been performing best in our visibility and, as such, a dent to American consumer confidence would blunt Nike’s recovery efforts,” said Drake MacFarlane, analyst at M Science.
China has remained a sore spot, with sales sliding 7% in the reported quarter.
In its second-largest market outside North America, the company has struggled with weaker product assortments, while slower innovation has led to share losses against fast-rising local competitors, including Anta and Li Ning.
The company’s gross profit margin contracted for a sixth straight quarter, falling 130 basis points to 40.2%, mainly due to tariffs.
(Reporting by Savyata Mishra in Bengaluru; Editing by Anil D’Silva)
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