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Nike has reported weakening sales in China in quarterly results that unnerved investors as the company attempts to pull out of a slump.
Shares of the US sports shoe and apparel maker fell by more than 10 per cent in after-market trading on Thursday in response to its financial report for the quarter ended November 30.
The company is in what chief executive Elliott Hill described as the “middle innings of our comeback” from a downturn that began about two years ago. Hill, a Nike veteran, was recruited out of retirement last year to attempt a turnaround.
Nike has lost ground to newer brands such as running shoe makers On and Hoka. Hill has emphasised winning back the loyalty of athletes as a foundation of future success.
Global revenue rose by 1 per cent to $12.4bn. The figure beat a consensus estimate of $12.2bn, according to a poll of analysts by Visible Alpha, but was about $1bn below sales in the same quarter two years ago.
While revenues rose in North America and the Europe, Middle East and Africa region, in greater China they dropped by 17 per cent to $1.4bn, led by a $249mn fall in footwear sales.
The China business had been beset by an array of problems with store traffic declining and unsold inventory leading to more markdowns and discounts in order to clean out products that had aged, chief financial officer Matthew Friend told analysts.
At outlets operated by retail partners in China, “we weren’t making the investment in our store fleet”, Hill said, “so our stores aren’t compelling”. He added that Nike was now boosting store investment in Shanghai and Beijing.
Hill acknowledged China “needs a reset”, including better adapting to the country’s extensive ecommerce market, but said “it will take time”.
Nike earlier this month shook up senior leadership, naming Venkatesh Alagirisamy as chief operating officer overseeing technology and operations. The roles of chief technology officer and chief commercial officer, held by Muge Dogan and Craig Williams, respectively, were eliminated. Senior leaders of Nike’s main regions — including greater China — now report directly to Hill.
He said the quarter was slightly better than executives had anticipated 90 days ago.
Nike’s gross profit margin declined by 3 percentage points to 40.6 per cent, which it attributed primarily to higher tariffs in North America, a cost the company has estimated at $1.5bn a year. The hit comes after US President Donald Trump’s trade wars raised the cost of imported shoes, clothes and sports equipment.
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