In this articleNKEFollow your favorite stocksCREATE FREE ACCOUNTPedestrians walk past a Nike store featuring a modern design and mannequins displaying winter apparel on December 5, 2024, in Wuhan, Hubei Province, China. Cheng Xin | Getty ImagesNike on Tuesday posted surprise sales growth in its fiscal first quarter but said it still has work ahead to execute its turnaround as it warned it expects sales to fall again during most of the holiday shopping season.Nike expects sales during its current quarter, which runs generally from early September to early December, to fall by a low single digit percentage, in line with expectations of a 3% decline, according to LSEG. Without favorable foreign exchange rates, sales could come in even lower, as the company said its guidance includes a 1 percentage point of positive impact from exchange rates.Nike has made progress in its turnaround plan, but the expected decline during most of the holiday shopping months would follow an 8% drop in revenue in the year-ago period. It’s a sign to investors that Nike’s recovery is moving slowly, even during the busiest time of the year for retailers.Higher tariff costs are hampering Nike’s efforts to turn around its business. The company now expects tariffs to cost it $1.5 billion and hit its gross margin by 1.2 percentage points in its current fiscal year 2026. That’s up from the $1 billion and 0.75 percentage point gross margin impact it projected in June. During its current quarter, Nike said it expects its gross margin to fall between 3 and 3.75 percentage points.In a press release, finance chief Matt Friend warned that “progress will not be linear.””I’m encouraged by the momentum we generated in the quarter, but progress will not be linear as dimensions of our business recover on different timelines,” said Friend. “While we navigate several external headwinds, our teams are focused on executing against what we can control.”Here’s how Nike performed during the quarter compared with what Wall Street was anticipating, according to consensus estimates from LSEG:Earnings per share: 49 cents vs. 27 cents expectedRevenue: $11.72 billion vs. $11.0 billion expectedNike’s reported net income in the three months ended Aug. 31 was $727 million, or 49 cents per share, compared with earnings of $1.05 billion, or 70 cents per share, in the year-ago quarter.Sales rose to $11.72 billion, up about 1% from $11.59 billion a year earlier.Revenue rose 1% during the quarter after Nike previously said it anticipated sales would fall by a mid-single digit percentage in the period. Still, Nike’s profits fell 31% while gross margin dropped 3.2 percentage points to 42.2% during the quarter — another warning sign to investors that its efforts to clear through old inventory are still ongoing.In a statement, CEO Elliott Hill said the company is making strides in three key areas: wholesale, running and North America. During the quarter, wholesale revenue rose 7% to about $6.8 billion, while sales in North America climbed 4% to $5.02 billion — better than the $4.55 billion analysts were expecting, according to StreetAccount.However, beyond those three areas, Hill acknowledged parts of the business are still struggling, primarily its China segment …
