More Pain To Come: Nike Posts Subpar Revenue, Issues Bleak Guidance

Nike Inc. (NYSE: NKE) reported weaker-than-expected earnings in its most recent quarter and issued a disappointing outlook for the year, deepening Wall Street’s pessimism on the prospects of the company’s turnaround strategy.

Revenue in the fiscal first quarter ended Aug. 31 was $11.2 billion, a decline of 4% from the year prior and slightly below Wall Street’s estimate. Nike’s profit over the same period sank 2% to $712 million, amounting to 48 cents a share. The company also announced it expects revenues “to decline high-single digits” in fiscal 2027.

“Sales came in light, but more or less in line with expectations,” said David Swartz, a senior equity analyst at Morningstar. “Most importantly, the guidance was weak. It looks like sales aren’t really going to get better in the next couple quarters.”

Nike has been sliding through a years-long slump, shedding over $200 billion in market value since November 2021. Chief Executive Officer Elliott Hill, who took over in October 2024, has not yet managed to revive the company. Under Hill, the market decline only accelerated as the company lost roughly 60% of its market value over the past two years.

The latest earnings report added to woes during the Oct. 2 trading session as shares plunged below $32 for the first time since September 2013. The stock later rebounded and closed at $33.90. Down 47% for the year, Nike is on track to its worst year on record.

During the earnings call, Nike announced a new restructuring plan dubbed “Pace.” Over the next five years, according to Hill, this program should save the company $2.5 billion through cutting costs and result “in fewer roles across Nike.” Earlier this year, Nike already slashed 1,400 roles in April and laid off 775 employees in January.

By introducing “Pace,” Nike’s leadership has been signaling a longer turnaround.

“We’re taking deliberate actions to improve performance for the long term, and that’s going to dampen performance now,” said chief financial officer Dave Denton during the earnings call with investors. “Yes, we’re going to experience some additional pain.”

For years, this pain has been most acutely felt in Greater China, where the company faces fierce local competition. The region has just posted a ninth consecutive quarterly revenue drop — to $1.2 billion, a sharp 26% plunge from the prior year. As part of “Pace,” Greater China will be grouped with Asia Pacific, while Latin America is being merged with North America.

Sydney Goodman, analyst at Bloomberg Intelligence, believes the next few years “will likely continue to be rough” for Nike. “The Pace restructuring program seems expensive,” she said. “They will be paying a lot for those savings and the benefits largely won’t be seen till fiscal 2029-30.”

Bank of America, J.P. Morgan and Morgan Stanley have all recently issued the equivalent of sell ratings on Nike stock. After Nike issued the weak guidance, Morningstar is now reconsidering its $94 target price and “Buy” recommendation for the stock.

“We have no rating on the stock right now; we have it under review” said Swartz. “The company is struggling, and it’s hard to know when it’s going to turn around, but I still think that will happen.” He added that Nike remains “a good long-term investment.”

Nike will provide more details on its turnaround plan during Investor Day on Nov. 16-17, the first such event hosted by the company in nine years.