Nike on Tuesday posted surprise sales growth in its fiscal first quarter, but the sneaker giant still has work ahead to execute its turnaround.

The company said revenue rose 1% in the three months ended Aug. 31, after previously saying 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 — a warning sign to investors that its efforts to clear through old inventory are still ongoing.

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 expected
• Revenue: $11.72 billion vs. $11.0 billion expected

Nike’s reported net income for the period 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.

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.

“While we’re getting wins under our belt, we still have work ahead to get all sports, geographies, and channels on a similar path as we manage a dynamic operating environment,” said Hill.

During the quarter, Nike direct sales fell 4% to about $4.5 billion. Revenue in China — one of the company’s most important markets — was down 9%.

Since Hill took over nearly a year ago, he’s been working to get Nike back to growth and undo some of the work his predecessor John Donahoe implemented. One of the most important parts of that strategy has been reigniting Nike’s innovation engine and clearing through stale inventory to make way for new styles.

Though the strategy is crucial to Nike’s efforts to grow again and take back market share, it comes with pain in the short term. Clearing out old inventory has required Nike to rely on discounting and less profitable sales channels to move products, which has impacted its profitability.

During the quarter, inventories were down 2% compared to the prior year as units decreased, which was offset by increased product costs related to higher tariffs.

Ahead of Nike’s release, investors were looking for any clues into how those efforts are going and how much longer they’ll take. The company was expected to provide more insight into its progress during a conference call with analysts at 5 p.m. ET.

Beyond inventory management, Hill has also pledged to realign Nike’s corporate structure so it would once again segment teams by sport instead of by women’s, men’s and kids. In late August, the company started shuffling teams. As part of the restructuring, Nike said it would cut around 1% of its staff, and most employees would be moved into new roles by Sept. 21. 

Hill has said a focus on sports over lifestyle will help the company win back its crucial athlete consumer, but lifestyle merchandise is still an important part of the strategy because it allows Nike to reach a larger consumer segment, and more women. Growing the number of female customers has been another important part of Hill’s strategy and Nike’s recent partnership with Kim Kardashian’s shapewear brand Skims is one of the ways it’s getting there.

NikeSKIMS, originally slated to release in the spring, officially launched last week. Investors will be looking out for color on how the new brand is performing and how it could affect sales.

This story is developing. Please check back for updates.

The booming business of betting across America has led to soaring concerns over problem gambling.

Generally, ads for legitimate, licensed casinos and sportsbooks carry some kind of disclaimer that gambling is supposed to be for entertainment. The small print might offer: “Gambling problem? Call 1-800-GAMBLER.”

That number is about as memorable and sticky as you can get. And it prompted a brief but intense legal battle over who has the right or the moral imperative to operate the closest thing the U.S. has to a national gambling hotline.

The National Council on Problem Gambling (NCPG) has been running the helpline since 2022, leasing it for $150,000 annually from the Council on Compulsive Gambling of New Jersey (CCGNJ), which had previously operated it since 1983.

Since the national organization took over, monthly call traffic has increased 34% and media mentions have soared more than 5,000%, leading to a third of Americans recognizing 1-800-GAMBLER as a national hotline, according to the NCPG.

Now the CCGNJ wants its number back.

The contract between the two groups ends Tuesday. The national group notified the New Jersey group of its intention to exercise its right of renewal and extend for another five years. CCGNJ refused.

“It’s our property, ” Luis Del Orbe, CCGNJ’s executive director, told CNBC. The group also owns 800gambler.org.

The National Council sued for an emergency stay this summer to prevent the New Jersey council from taking back operations, arguing that the local group doesn’t have the resources to staff or operate the hotline around the clock.

NCPG has significant financial backing from the NFL — more than $12 million over six years — and major sportsbook operators. The council spends $1.5 million annually providing infrastructure and connection for callers in 10 states and serving as a kind of call-in way station for dozens of other jurisdictions.

Lawyers for the national council argued that reverting it back under New Jersey’s operation would have devastating consequences.

“Thousands of individuals and families could suddenly find themselves without access to the only national lifeline for problem gambling,” said Amanda Szmuc, an attorney with Offit Kurman.

Del Orbe of the New Jersey organization said his staff is prepared for an increase in calls. When calls come into his office after-hours, they’re forwarded to a 24-hour call center in Louisiana — the same one that services many states and local jurisdictions that funnel through 1-800-GAMBLER, he said.

Del Orbe told CNBC his organization felt NCPG was “weaponizing the number,” demanding data on problem gambling from local councils and threatening to bar them from the hotline if they refused.

The NCPG collects and analyzes data from problem gambling calls, often to illustrate the danger of addiction to betting. But not every state that uses 1-800-GAMBLER shares its statistics with the national council.

The national council said, “Despite repeated outreach and offers of consultation, training, and stipends, two state councils declined to participate, and one failed to meet requirements.” It said it began rerouting calls from those states to the call center in Louisiana.

“Our greatest fear is that people in crisis will pick up the phone, or send a text, and find no one on the other end,” said Jaime Costello, director of programs at NCPG.

The NFL said in a statement to CNBC, “Under NCPG’s stewardship, 1-800-GAMBLER has been transformed into a vitally important national resource—making it easier for anyone, anywhere in the country to get quality care when they need it. Any disruption or degradation of that service is deeply concerning.”

On Monday, the New Jersey Supreme Court denied NCPG’s request for an emergency stay, a last ditch effort to keep the number from reverting to the local council.

The National Council on Problem Gambling says for now it will revert to using its old number, 1-800-522-4700, which isn’t quite as easy to remember.