Nike Stock Slides After Sales Miss, China Slump and Layoff Plan
Nike shares fell in after-hours trading after first-quarter revenue missed estimates, China sales dropped 26% and the company announced a restructuring with layoffs.
Nike shares dropped in after-hours trading on Thursday, October 1, after the sportswear giant reported first-quarter revenue that missed Wall Street estimates. The company also announced a restructuring plan that will lead to job cuts.
Yahoo Finance reported that the stock fell as much as 6% after the closing bell. After-hours moves can change quickly, so that figure is only a snapshot.
What Nike reported
Revenue for the fiscal first quarter fell 4% to $11.21 billion. Analysts had expected about $11.33 billion, according to the consensus figure cited by Yahoo Finance.
Net income was $712 million, down 2% from $727 million a year earlier. Earnings per share came in at $0.48, compared with $0.49 a year ago.
China was the main drag. Revenue in that market fell 26%, and Nike said sustained declines there were largely behind the hit to Nike brand revenue.
Not everything missed. North America revenue of $5.13 billion edged past the $5.11 billion analysts expected, according to StreetAccount. Gross margin was 42.8%, up 60 basis points and ahead of the 42.4% estimate.
Restructuring and layoffs
Nike also unveiled a restructuring strategy called Pace. It involves modernizing the supply chain, organizing the business into three geographies, building a new campus in India, and changing how and where people work.
The company expects roughly $2.5 billion in savings through fiscal 2031. It will take a 15-cent restructuring charge against fiscal 2027 earnings per share.
Layoffs are expected to begin in 2027. Nike gave no further details. In a letter to staff, CEO Elliott Hill said the work "will result in fewer roles across Nike" and acknowledged the uncertainty that creates.
The outlook
Nike said it expects revenue to decline by a high-single-digit percentage in fiscal 2027.
CFRA analyst Zach Warring, who rates the stock a Buy, told Yahoo Finance the quarter was "what you'd expect from a new CEO three or four quarters in, but not two years in." He said the company can now work on sluggish regions, naming Greater China and Europe.
Hill, who took over nearly two years ago, said in the earnings release that Nike has "more work to do" in Nike Sportswear, Jordan Brand and Greater China.
Why investors are on edge
Nike was already under pressure. Yahoo Finance noted that the company had pulled back from several major retail partners to focus on its own sales channels, which gave rivals an opening.
Other recent signs of strain include:
- Dick's Sporting Goods warned in late August about its business, partly because Nike is heavily discounting slow-moving product.
- Kylian Mbappé ended his long-term tie-up with Nike last month and said he will join Swiss brand On.
- Nike was recently dropped from the S&P 100 after nearly 20 years in the index.
CNBC also pointed to macroeconomic pressure on Nike's customers, with geopolitical tensions and higher inflation slowing spending.
This was the first earnings report under new CFO Dave Denton, who previously held a role at Pfizer. Investors will now watch how Nike carries out the restructuring and whether China stabilizes.
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