Nike’s difficulties continue, but recovery plan may be working

Nike’s efforts to revitalize its business are showing some results, despite persistent challenges in China and with its struggling Converse brand.

Sales grew 1% in Nike’s most recent quarter, ended Nov. 30, supported by strong performance in North America, the company said. Even so, profit fell 32%, pressured by problems in mainland China, Hong Kong and Taiwan, where revenue fell 17%.

Also read: Nike exceeds sales expectations, but performance in China worries the market

Overall, Nike is trying to recover after a series of mistakes led to a prolonged drop in sales and loss of market share.

The company, based in Beaverton, Oregon (USA), had invested in product lines focused on lifestyle and lost space in performance segments, such as running.

China has been a sore spot for Nike in recent quarters. Company executives had already told investors that a recovery in the country would require both time and investment.

Nike warned that weakness in China will persist and continue to weigh on sales. The company expects global revenue to decline slightly in the current quarter, despite forecasting growth in North America.

Nike CEO Elliott Hill, who came out of retirement to take on the role last year, has been working to clear out old inventory and accelerate product development, especially performance sneakers.

He also reorganized the company’s corporate structure and replaced many senior executives.

Hill said Nike needs to “redefine” its approach in China, starting with investments in Beijing and Shanghai, and that it will change the mix of products offered in the market.

“What we’ve done is a start, but it’s not happening at the level or speed we need to drive broader change,” he told investors during a conference call this month.

Results in North America indicate that Nike has made significant progress in its recovery.

“It looks like Nike is accelerating its growth,” said Simeon Siegel, an analyst at Guggenheim Securities. “They’re selling more stuff and getting people to buy more.”

Still, Trump’s tariffs have hurt Nike’s progress. The company expects the tariffs to add $1.5 billion to its costs and reduce its gross margin in the current fiscal year.

To deal with higher costs, Nike raised some prices on its sneakers, apparel and equipment.

Hill has been cautious in setting expectations, telling investors in September that the recovery’s progress “will not be perfectly linear.”

Nike’s Converse brand also continues to face difficulties. Sales fell 30%, with declines in all regions. Management is revamping the Chuck Taylor line, its most popular sneaker.