The news: Nike returned to growth in fiscal Q1, snapping a four-quarter streak of declining sales.

• Revenues rose 1% YoY to $11.72 billion on a reported basis in the quarter ended August 31. That was a remarkable improvement from the 12% decline reported for Q4—and well ahead of FactSet’s $11 billion consensus estimate.
• North America revenues rose 4% YoY on a constant currency basis, which helped offset a 10% YoY decline in China sales.

The turnaround strategy: Much of CEO Elliott Hill’s strategy amounts to a reversal of the tactics employed by his predecessor, John Donahoe.

• Nike is in the process of becoming less reliant on tried-and-true franchises like Air Jordans and Dunks, and more focused on developing the next big shoe—with help from WNBA stars like Sabrina Ionescu and A’ja Wilson.
• It is also signing wholesale deals left, right, and center in a bid to reach as wide an audience as possible. Nike resumed selling on Amazon earlier this year and is also courting younger (and female) shoppers with Urban Outfitters and Aritzia partnerships. That paid off handily last quarter: Wholesale revenues rose 5% YoY on a constant currency basis, compared with a 5% decline in Nike Direct sales.
• The much-anticipated launch of NikeSKIMS is also getting the company back into the cultural conversation, while enabling it to forge deeper ties with women shoppers.

The headwinds: Despite the upbeat quarter, management struck a cautious tone, acknowledging external pressures as well as internal challenges.

• Tariffs are a significant cost for the company, given its reliance on Southeast Asian manufacturing.
• And Nike is still having to resort to discounts to clear inventory, adding to the margin pressure.

Our take: Nike is beginning to see the light at the end of the tunnel, as Hill’s turnaround plan begins to make headway despite considerable uncertainty.