Nike Shares Tumble After Forecasting Sharp Revenue Drop, Announcing More Layoffs

Nike Inc. is planning further job cuts as part of a broad restructuring after the sportswear giant projected a surprisingly steep revenue decline for fiscal 2027, deepening investor concerns about the pace of its turnaround. The company's shares fell 8.5% in extended trading Thursday following the announcement.

Downbeat Forecast and Restructuring

Nike said it expects full-year revenue to decline in the high single digits, a far more pessimistic outlook than the roughly 2% drop analysts had forecast, according to LSEG data. The guidance came after the company reported first-quarter revenue of $11.21 billion, missing analysts' average estimate of $11.32 billion.

In response to the persistent challenges, Nike unveiled a new restructuring program aimed at delivering $2.5 billion in savings through fiscal 2031. Key elements of the plan include:

• Additional job cuts, with the number of affected roles yet to be determined. Employees are expected to be notified in 2027.
• Consolidating its business from four geographic regions into three: Americas, EMEA, and a combined Asia Pacific and Greater China unit.

"Our Nike performance business is not yet large enough to offset the pressure we’re seeing in Nike sportswear, Jordan brand, and Greater China," CEO Elliott Hill said on a post-earnings call, adding that reviving these areas "will take time."

China Woes Deepen

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A primary driver of the weak outlook is the deteriorating performance in Greater China, historically a major growth engine for the brand. Sales in the region tumbled 26% on a constant-currency basis in the first quarter, marking the ninth consecutive quarter of decline.

Nike is attempting to regain control of its brand in the region by pulling online sales rights from some of its largest retail partners, a move intended to curb rampant discounting. However, Hill warned this digital cleanup will take "multiple seasons" and negatively impact near-term revenue and profitability in China. Some analysts remain skeptical, with BNP Paribas senior analyst Laurent Vasilescu stating in a recent note that Nike has a "product problem" in China, not a distribution one.

Market Context

The weak performance in China and with key brands like Jordan is overshadowing relative bright spots, such as a 2% constant-currency sales increase in North America. Despite the sales miss, Nike's gross margin improved by 60 basis points to 42.8%, helped by lower logistics costs.

The restructuring and gloomy forecast signal that the challenges facing Nike under CEO Elliott Hill, now in his second year, are more entrenched than previously anticipated. The company's struggles were recently highlighted when S&P Dow Jones Indices removed Nike from the S&P 100 index in September after an 18-year tenure.