By Rajwa Quasim
Nike shares fell sharply after the sportswear giant warned that its turnaround would take longer than expected and unveiled a new restructuring plan that could lead to additional job cuts.
Nike reported $11.21 billion in revenue for its fiscal first quarter, down 4% from the same period a year earlier. Net income fell about 2% to $712 million. Earnings per share came in at 48 cents, 5 cents above analysts’ expectations. Gross margin was another bright spot, at 42.8%.
Nike Brand revenue declined 4% during the quarter, with the biggest weakness coming from Greater China and Europe, the Middle East and Africa. China remained a major problem, with currency-neutral sales falling 26%. North America provided some relief with sales growth during the quarter.
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Nike’s direct-to-consumer business also weakened, with revenue declining 8%, while Nike Brand digital sales dropped 13%. Converse revenue fell 28%.
The company now expects fiscal 2027 revenue to decline by a high-single-digit percentage. It forecast earnings per share of between $1.15 and $1.35, excluding 15 cents per share in restructuring costs. Efforts to reduce product supplies are also expected to put additional pressure on revenue over the next two years.
Alongside its earnings report, Nike unveiled a restructuring program called Pace aimed at reducing costs and improving its operating structure. The program is expected to generate $2.5 billion in cumulative savings through fiscal 2031.
The restructuring includes plans for a new campus in India, changes to Nike’s global supply chain and reorganizations across different geographic regions.
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The program is expected to result in additional job cuts, although Nike has not disclosed how many positions could be affected. The company is expected to provide more details next year.
Nike CEO Elliott Hill said, “We have more work to do in Nike Sportswear, Jordan Brand and Greater China, and we’re taking deliberate actions to strengthen those businesses the right way for the long-term.”
Nike shares fell about 9% in overnight trading after closing at $35.15 on Thursday. While the company exceeded earnings expectations for the latest quarter, investors appeared concerned about its weaker sales outlook.
“As we move forward, we remain focused on strengthening the health of our product portfolio, improving productivity across the enterprise and allocating resources with discipline to support long-term shareholder value,” said Dave Denton, Nike’s CFO.