Nike (NYSE:NKE) has some big questions to answer for investors on Tuesday. In its fiscal first-quarter report on Sept. 22, the sports apparel and footwear giant is expected to make progress toward returning to growth following COVID-19 shutdowns at the end of fiscal 2020. But there are major questions marks about how the business might perform in a more price-sensitive shopping environment this holiday season and into next year.

With those big-picture trends in mind, let's look at what investors should be watching in this announcement.

A jogger laces up his shoes.

Image source: Getty Images.

Steady rebounds

Three months ago, Nike revealed some brutal operating metrics for the period that spanned the maximum impact from pandemic retailing closures. Sales dove 38% overall as people around the world dramatically reduced spending on consumer discretionary products like apparel.

Look for Nike to report major demand improvements this week. Most investors who follow the stock are expecting sales declines to land at about 16%. The market-specific revenue trends will be much more informative since they'll show whether China has quickly returned to strong growth following last quarter's modest uptick.

The U.S. segment likely continued to shrink, but the scale of that slump is the big question. In early September, rival lululemon athletica reported a 51% decline at stores through July, which was partially offset by booming digital sales. Nike's U.S. division shrank at a 46% rate in the previous quarter.

About those expenses

Nike focuses on the premium end of the market and its supply chain is one of the most efficient in the industry. Those assets should help it avoid massive inventory writedown charges associated with stale merchandise. Walmart and TJX Companies booked these one-time expenses earlier in the year.

Still, keep an eye on gross profit margin for signs that oversupply pressures are leading to more price cuts. Even if they aren't pressuring profitability today, CEO John Donahoe and his team will likely have plenty to say about evolving cost-cutting plans that reflect the new reality of lower customer traffic in stores at least through early next year. Nike had been positioning the business for a bigger e-commerce focus, and those plans have accelerated in recent months.

Looking ahead

Nike will likely cite the same uncertain selling environment that lululemon described as it declines to issue a specific growth outlook. The back-to-school season calendar shifted dramatically this year, for example, and demand risks include a sharp recession, continued COVID-19 outbreaks, and reduced government fiscal support spending, just to name a few.

That said, executives might have some positive comments to make about short-term expectations, especially if key markets like China are already almost fully recovered. It will be interesting to see whether Nike believes the U.S. niche will return to growth in the next quarter or so before it reaches its prior expansion pace in the low double digits, perhaps as soon as late fiscal 2021.