Greater China sales plunge 26% while Pace targets US$2.5 billion in savings by fiscal 2031
US sportswear maker Nike reported a 4 percent revenue decline to US$11.21bn for the fiscal first quarter ended August 31 and announced a restructuring program that will cut an undisclosed number of roles from calendar 2027.
Adjusted earnings reached 48 cents a share against consensus of 43 cents, CNBC reported citing LSEG estimates, while revenue fell short of the US$11.32bn analysts expected.
Net income declined 2 percent to US$712m from US$727m.
Gross margin rose 60 basis points to 42.8 percent on lower warehousing and logistics costs, Reuters reported.
Nike told investors in a filing with the US Securities and Exchange Commission that it expects fiscal 2027 revenues to decline high single digits, with adjusted diluted earnings per share of US$1.15 to US$1.35, excluding approximately US$0.15 of restructuring expenses related to Pace.
Analysts had on average estimated a full-year revenue drop of about 2 percent, Reuters reported citing LSEG data.
"Despite that progress, our Nike performance business is not yet large enough to offset the pressure we're seeing in Nike Sportswear, Jordan Brand, and Greater China," chief executive Elliott Hill told analysts on the earnings call, as reported by CNBC.
Greater China revenue dropped 26 percent on a constant-currency basis, Reuters reported, a ninth consecutive quarterly decline in a region accounting for about 15 percent of annual revenue.
From January, Nike will pull online sales rights from some of its largest retail partners in China, a change Hill said would take "multiple seasons."
"Nike does not have a channel problem in China, but rather a product problem," BNP Paribas senior analyst Laurent Vasilescu said in a research note cited by Reuters.
North America revenue reached US$5.13bn, up 2 percent on a constant-currency basis.
The program, named Pace, rests on four priorities, Hill wrote in an October 1 note to employees: supply chain modernization, organizing into three geographies, a new campus in Bengaluru, India, and changes to the workforce.
The Americas, Asia Pacific and Greater China, and Europe, the Middle East and Africa replace four regions, with teams moving into the new structure in fiscal 2028.
Nike expects Pace to deliver approximately US$2.5bn in savings through fiscal 2031, Reuters reported, with the majority realized in fiscal 2029 and 2030.
"This work will result in fewer roles across Nike, and I want to acknowledge that news like this creates uncertainty. I don't take that lightly," Hill wrote.
The company does not yet know how many roles will go and will begin notifying employees in 2027.
CNBC reported the cuts are the third round Nike has announced this year.
Neil Saunders, managing director of GlobalData, told Reuters that the restructuring plans are not "inherently wrong" but suggest Nike's current model is "not really fit for purpose."
He said the plans raise the question of why Nike did not make the changes sooner.
Shares fell 3.8 percent to US$33.80 just after 5pm EDT on October 1, their lowest point since September 2013, Forbes reported.
According to CNBC, the stock is down more than 40 percent this year.
