Nike posted a mixed fiscal first quarter on Thursday and announced a restructuring plan, dubbed Pace, that will bring layoffs starting in 2027. The company also guided for a high-single-digit percentage revenue decline in fiscal 2027, citing continued weakness in China and its sportswear business.
Shares fell roughly 3% in extended trading on Thursday after the company reported fiscal first-quarter results that beat on earnings but missed on revenue. The retailer also unveiled a restructuring that will lead to job cuts next year.
Earnings beat, revenue misses
The company posted earnings per share of 48 cents against an expected 43 cents, while revenue fell 4% to $11.21 billion, short of the $11.32 billion analysts had expected. Net income came in at $712 million, down 2% from $727 million a year earlier.
China remained the weak spot: revenue in the market dropped 26%, and CEO Elliott Hill told analysts the company is "moving with urgency" to fix the region. North America fared better, with revenue of $5.13 billion edging past the $5.11 billion estimate. Gross margin landed at 42.8%, above the 42.4% forecast.
However, the sportswear segment, which Hill said made up just under half of the quarter's revenue, fell by a low-double-digit percentage. Nike's stock has also been one of the weakest performers in the S&P 500 this year.
Restructuring to bring layoffs
Nike also announced a restructuring plan, called Pace, intended to position the company for long-term growth. The plan is expected to result in layoffs beginning in 2027, though the company gave no figure for how many roles would be cut. It marks the third round of layoffs Nike has announced this year.
The plan covers supply chain modernization, a shift to three operating geographies — the Americas; Asia Pacific and Greater China; and Europe, the Middle East and Africa — and a new campus in India. Nike expects Pace to deliver approximately $2.5 billion in savings through fiscal 2031, while adding a 15-cent restructuring expense to fiscal 2027 earnings per share.
Outlook points to further declines
For the full year, Nike guided for revenue to decline by a high-single-digit percentage in fiscal 2027, with adjusted earnings per share expected between $1.15 and $1.35. Shares of Nike have plummeted more than 40% this year, and the company said realizing the full benefit of its turnaround efforts will take time.
Sources: CNBC, MarketWatch (snippet-based)
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