Nike turns a page

Nike reported quarterly results last Thursday night. They were rather ugly, but the market was expecting worse, so the share price popped 15%.

Nike CEO Elliott Hill said that it was "time to turn the page." Nike is at an inflection point in their turnaround strategy, and Hill expects things to improve from here. Having said that, the company is only taking things one quarter at a time, and remains reluctant to give guidance too far out.

Nike has two main strategy shifts. The first is going back to its roots of focusing on wholesalers to distribute its products. Previously, dumping wholesalers in favour of higher-profit-margin direct-to-customer sales channels left massive gaps in the market, which upstart brands like Hoka and ON were more than happy to fill.

The second shift is to return to segmenting the company by sport category, instead of the previous management's focus on 'Men', 'Women' and 'Kids'. Imagine being a basketball shoe designer, and having to shift your focus to designing three different shoes for each of your reporting segments. Sounds very messy.

As for the sloppy numbers, revenue dropped 12% to $11 billion, with sales in North America and China down 11% and 20% respectively. Due to the costs of reorganisation and offloading old inventory, profits plummeted 86% to $211 million, down from $1.5 billion last year.

Nike isn't out of the woods yet. In previous announcements, management was very careful to warn the market that worse was still to come, but that has now changed. This is the first time the new management team has sounded upbeat about future prospects. Onwards and upwards.