Quarterly Report Misses Expectations, Revenue Stagnates! Nike Announces New Round of Layoffs, Stock Price Nearly Halved This Year in "Worst-Ever" Performance | Earnings Report Insight

Nike's road to recovery is proving to be much longer than anyone expected. Disappointing quarterly results, full-year revenue guidance well below market forecasts, and another round of layoffs—this world’s largest sportswear brand is facing a combination of mounting pressures, while Wall Street’s patience is rapidly running out.

On Thursday, October 1st, local time, Nike released its financial results for the first quarter of Fiscal Year 2027. The company's quarterly revenue fell 4% year-over-year to $11.2 billion, missing market expectations; net profit fell 2% to $712 million.

More worrying for investors is the outlook: Nike forecasts that full-year revenue for Fiscal Year 2027 will decline by a “high single-digit percentage” compared to the previous year, much worse than the previously expected drop of about 2%. Its adjusted full-year earnings per share guidance of $1.15 to $1.35 was also significantly below analysts’ estimates of $1.68. After the report, Nike’s stock price fell by more than 8% in after-hours trading.

At the same time, Nike announced the launch of a new cost reduction plan called "Pace," aiming to save $2.5 billion by the end of Fiscal Year 2031, which will be accompanied by the elimination of some positions among its 73,000 employees, while its global regional structure will be consolidated from four regions into three.

According to Bloomberg data, Wall Street analysts’ overall rating for Nike has fallen to its lowest level in at least 25 years. Bank of America downgraded it to "underperform" this week and set a target price of $30. Based on the after-hours price, Nike shares are down nearly 50% for the year so far; if it does not recover by the end of the year, it will post its worst annual performance since 1993.

Quarterly Results Under Pressure on All Fronts

Nike's first fiscal quarter performance fell short across the board.

The report showed that for the quarter ending August 31, Nike’s revenue was $11.21 billion, a decrease of 4% year-over-year and below FactSet analysts’ forecast of $11.32 billion. Adjusted EPS was $0.48, slightly higher than analysts’ estimate of $0.44, but net profit still dropped 2% to $712 million year-over-year.

Sales in Greater China, calculated at constant currency, declined 26% year-over-year, marking the ninth consecutive quarter of decline. CEO Elliott Hill said on the earnings call that Nike needs to increase local relevance and reduce discount promotions in China. He noted that most physical stores in the region haven't been renovated in over seven years. Increasing competition from local brands and shifting consumer demand is eroding Nike’s market share.

The Sportswear division also performed weakly, with revenue declining by a low double-digit percentage, now accounting for less than half of Nike's overall first quarter revenue. Hill admitted, “Lifestyle as a whole currently lacks momentum, which is affecting traffic. Consumers are indeed cautious, but as an industry leader, we have a responsibility to bring more creativity to sportswear.”

Sub-brand Converse also dragged down overall performance, with first quarter revenue of $263 million, down roughly 28% year-over-year.

Full-Year Outlook Far Below Expectations, Recovery Timeline Delayed Again

Nike’s outlook for Fiscal Year 2027 disappointed the market, with analysts broadly lowering earnings forecasts.

Nike forecasts that revenue for fiscal 2027 (ending May 2027) will decline by a “high single-digit percentage,” with an adjusted EPS range of $1.15 to $1.35, compared to analysts’ previous estimate of $1.68. This means Nike’s revenue will be billions of dollars lower than market projections.

According to Bloomberg, Bank of America analyst Lorraine Hutchinson downgraded Nike from "neutral" to "underperform" in her latest research report, pushed back her sales recovery forecast to 2028, and sharply cut her FY2027 and FY2028 earnings estimates. Hutchinson’s price target of $30 implies about 16% downside from Friday's closing price of $35.75.

"We see downside risk to both EPS expectations and valuation, as Nike’s innovation continues to be overshadowed by a pressured classics business, while categorical and macro headwinds compound," Hutchinson wrote in the report.

New Layoffs and Restructuring, "Pace" Plan Targets $2.5 Billion in Savings

Nike has announced the launch of a new cost reduction plan that will further cut jobs and consolidate its global regional structure.

Nike said the new “Pace” cost-cutting initiative will generate cumulative savings of about $2.5 billion by the end of Fiscal Year 2031, but will incur about $1 billion in pre-tax restructuring costs, mainly related to employee expenditures, with about $300 million in severance already recognized in the previous fiscal year.

The company plans to cut some of its 73,000 employees, but has not yet disclosed the specific number or locations affected. Related position adjustments are expected to begin notifications to employees in 2027. Meanwhile, Nike will reduce the number of its global regions from four to three to improve operating efficiency.

In addition, Nike plans to build a new campus in Bengaluru, India. Hill called India “an important growth market and manufacturing base for Nike, with strong capabilities and talent resources” in an internal letter to employees.

Hill wrote in the internal letter, “The future belongs to companies that can move faster, get closer to local athletes and consumers, and invest more aggressively in innovation. To achieve this, Nike must change—to become more agile, more efficient, and more athlete-focused.”

Jordan Brand Oversupply, Retro Sneaker Strategy in Urgent Need of Reset

Nike has acknowledged its overreliance on classic retro products, and plans to intentionally reduce the scale of Jordan brand launches.

Hill admitted on the earnings call that there is an oversupply issue with Jordan brand basketball shoes: "We're going to return to the scarcity model we created. Simply put, we've supplied too many of our iconic retro products and expected too much of them.”

He said Nike plans to “deliberately reduce the quantity and frequency of certain Jordan retro releases” to rebuild consumer anticipation. “When consumers see the Jumpman logo, it should feel special. It should feel like something worth having,” Hill said.

At the same time, Nike is also trying to introduce new products to attract value-conscious consumers. Some new models—like the Vomero running shoes and the Caitlin Clark signature shoe, which sold out quickly after Thursday’s launch—gained market recognition. However, analysts broadly believe Nike’s overall new product lineup still lacks adequate market appeal, while competitors such as On Running and Hoka continue to capture consumer mindshare.

Wall Street Confidence Falls to 25-Year Low, Brand Image Takes Multiple Hits

Analyst ratings are at historical lows, with Nike also facing multiple challenges to its brand image.

According to Bloomberg, Nike’s aggregate Wall Street rating has fallen to its lowest in at least 25 years. Nike’s share price has fallen nearly 50% this year; if it fails to rebound before year-end, it will mark its worst annual performance since 1993—the year Michael Jordan first retired from professional basketball. Since Hill’s return was announced more than two years ago, Nike’s market cap has evaporated by nearly $77 billion.

On the brand side, Nike has also recently suffered several setbacks. According to Bloomberg, both teams in the FIFA World Cup final wore apparel by competitor Adidas; French football superstar Kylian Mbappé switched to On Holding; and Converse came under fire for an ad that was criticized for invoking the history of racial violence.

At the management level, new Chief Financial Officer David Denton joined Nike in August from Pfizer. Bank of America analyst Hutchinson noted that Denton is entering “a situation with virtually no room for operational missteps.”

“With a new CFO in place, cost reduction will be a core focus,” Hutchinson wrote. “We see no room to cut demand generation expenditures, but expect operating management expenses to decline this year, and the cost structure to be assessed with fresh eyes.”