Nike just took its worst earnings hit yet from its big turnaround plan

Nike’s efforts to turn around its performance contributed to a steep drop in profit in the latest quarter, but the company cautioned that the most recent three-month period could be as bad as it’s going to get.

The sports retailer's profit for the quarter that ended last month fell 86% compared with a year ago to $211 million. Revenue fell 12% to $1.5 billion, dropping across regions and slumping 21% in the greater China market in particular.

The Oregon-based retailer also spent more on sports and brand marketing, further dampening its earnings. Nike’s gross margin, a helpful measurement in looking at firms’ profitability, also decreased, which Nike said was partly a result of bigger discounts.

The results “reflected the largest financial impact from our Win Now actions, and we expect the headwinds to moderate from here,” Chief Financial Officer Matthew Friend said in a statement in the latest earnings report, referring to Nike’s plan to revamp the company.

Elliott Hill, a long-time Nike executive who returned to the company as CEO late last year after retiring in 2020, cautioned that while Nike’s results were in line with what the firm expected, “they are not where we want them to be.”

“Moving forward, we expect our business to improve as a result of the progress we’re making through our Win Now actions,” Hill said in a statement.

Hill announced the company’s plan to rightsize itself back in December. In early May, the retailer said it was rejiggering how part of the company was organized at the top and appointed several executives and leaders, all of whom have been at Nike for decades, to new roles.

Shares were down 1.6% in after-hours trading Thursday before the company started its earnings call.