Nike shares dropped nearly 9% in pre-market trading on Friday after the sportswear giant reported mixed fiscal first-quarter results.
Although Nike beat earnings expectations, weaker-than-expected revenue and continued pressure across several key markets weighed heavily on investor sentiment.
Nike Earnings Beat Expectations
Nike reported adjusted earnings of $0.48 per share, above Wall Street expectations of $0.44 per share.
Revenue, however, came in at $11.21 billion. That was below analyst estimates of $11.35 billion.
On a currency-neutral basis, revenue declined 5% compared with the same period a year earlier.
Revenue Weakness Hits Key Markets
The revenue decline was broad-based.
Sales weakened across Greater China and the EMEA region, while Nike Direct revenue fell 8%.
The results highlight the challenge facing CEO Elliott Hill as he works to restore growth at the world’s largest sportswear company.
Nike has spent the past several years dealing with softer demand, changing consumer trends and a broader strategic repositioning.
Stifel analysts said they were not yet prepared to call a bottom for Nike shares, especially given the stock’s valuation based on projected fiscal 2027 earnings.
Nike Gross Margin Improves
Nike did deliver some encouraging news on profitability.
Gross margin increased by 60 basis points to 42.8%.
The improvement was mainly driven by lower warehousing and logistics expenses.
However, stronger margins were not enough to ease investor concerns over Nike’s weakening revenue outlook.
Nike Issues Weak Fiscal 2027 Guidance
Nike also provided a cautious outlook for fiscal 2027.
The company expects revenue to decline by a high-single-digit percentage during the year.
Adjusted earnings per share are forecast to come in between $1.15 and $1.35.
That guidance excludes approximately $0.15 per share in restructuring-related expenses.
The weak outlook added to concerns that Nike’s turnaround could take longer than investors had hoped.
Nike Launches Major Restructuring Plan
Nike is also moving forward with another large restructuring program.
The company’s new Pace operating model is expected to generate around $2.5 billion in cumulative savings through fiscal 2031.
The plan includes supply-chain modernization, a new campus in India and a reorganization of the business around three geographic regions.
Nike expects the program to generate approximately $1 billion in pretax charges through fiscal 2031.
Around $300 million of those costs are expected to be recorded during fiscal 2027.
Nike Turnaround Still Faces Challenges
CEO Elliott Hill said Nike’s “Sport Offense” strategy is showing measurable progress across the company’s performance business.
However, Hill also acknowledged that more work remains in several important areas.
These include Nike Sportswear, Jordan Brand and the Greater China market.
Improving performance in these segments will likely be an important part of Nike’s broader recovery strategy.
Nike Stock Remains Under Pressure
The sharp market reaction comes despite significant pessimism already being reflected in Nike’s stock price.
Short interest currently represents more than 7% of Nike’s available shares, suggesting that a meaningful number of investors remain positioned for additional downside.
That could also make Nike stock more sensitive to unexpected positive developments.
Any evidence that revenue growth is stabilizing or that the company’s restructuring plan is producing results could trigger a stronger market reaction.
On the other hand, continued weakness in major markets could reinforce concerns that Nike’s turnaround will require more time.
For now, investors will likely remain focused on sales trends, margin performance and the company’s progress toward restoring sustainable growth.
