(New York) US sportswear maker Nike posted a sharp drop in quarterly net profit, driven by markdowns to reduce inventory and cost increases, despite rising revenue.

Net profit came in at $1.0 billion for the fourth quarter of its lagged fiscal year that ended in late May, down 28% from the same period last year, according to a statement on Thursday.

Reported per share, data scrutinized by analysts, it comes out at 66 cents, a little less than the 67 cents expected by Wall Street, which immediately sanctioned the title of the group from Beaverton (Oregon), down more than 4% in electronic exchanges after closing.

Gross margin eroded to 43.6% from 45% a year earlier, mainly due to higher component costs as well as high freight and logistics costs, in addition to higher discounts .

“Nike is facing a slowdown in demand for sneakers and apparel that is reducing orders from wholesalers, increasing inventory and requiring more marketing and promotion to move volumes,” Neil Saunders of GlobalData.

“Nike remains profitable, but its margins are deteriorating significantly, in part due to promotions to reduce inventory,” the analyst added.

During the earnings conference call, chief executive John Donahoe said inventory was flat in value year-over-year, but down in number of items.

“The steps we’ve taken (to reduce inventory) position us to generate more profitable growth in the future,” the executive explained.

After relying heavily on e-commerce and its own points of sale, Nike recently decided to diversify its distribution channels and returned to several generalist brands, including the Macy’s department store chain.

For the quarter as a whole, revenue was up 4.8% to $12.8 billion, better than the $12.5 billion forecast by analysts.