Nike's latest quarter showed a 4% revenue drop to $11.2 billion, with declines in Greater China partly offset by growth in North America. Net income came in at $712 million, a 2% decline from $727 million the prior year. Investors weren't thrilled.
The stock fell for a second straight day Friday, recently off about 6% in morning trading and lower by nearly 45% year to date. The company also said it expects revenues to decline in the high single digits in 2027.
With Pace, its new operating model, Nike is aiming to trim costs by $2.5 billion by 2031. The plan calls for enhancements to the global supply chain, a shift to three regional operating units, the establishment of an India campus, and additional streamlining aimed at lowering costs. Headcount will be affected. "This work will result in fewer roles across Nike, and I want to acknowledge that news like this creates uncertainty. I don't take that lightly," President and CEO Elliott Hill said, adding that decisions about impacted roles "will begin in calendar year 2027 and beyond."
This year, Nike has executed two rounds of layoffs, eliminating 775 roles at U.S. distribution centers in January and a further 1,400 positions - mostly within its tech division - in April. Hill framed the priorities ahead: "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."
Citi analysts kept a "neutral" stance after the company's sales outlook fell short of market expectations. In their words, "Nike is turning into a cost-cutting story, announcing a $2.5bn cost savings program as management is adapting to the reality of significant pressure within Sportswear, Jordan, and China." They said management intends to share more about the five-year outlook during investor day, while specifics on when Pace will actually "move the dial" will not arrive until 2029. As they put it, "It isn't out of the question that Nike can beat some of the guidance they just provided, but there really is no justification (in our view) for Nike to receive a premium multiple versus its growing peers."
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Bottom line for your money: Nike is leaning into efficiency while bracing for a 2027 revenue decline and more layoffs, with a longer runway before Pace shows up in the numbers. If you follow the brand, watch for investor day updates and how Sportswear, Jordan, and China trend from here.
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