Nike Inc. saw strength across performance categories in the fiscal first quarter ended August 31, but double-digit declines across sportswear, the Jordan brand and within China triggered a sales shortfall. Continued weakness in those areas, along with related moves to cut inventories, caused Nike to provide FY27 guidance sharply below analyst targets but Nike’s officials spelled out several steps being taken to revive top-line momentum.
Nike’s shares in afternoon trading are down about 5 percent on the news.
Sales in the first quarter reached $11.21 billion, down 4 percent reported and 5 percent currency-neutral year over year and missing analysts’ consensus estimate of $11.3 billion.
By geography on a currency-neutral basis, Greater China declined 26 percent, EMEA declined 5 percent, while APGC was flat, partially offset by a 2 percent growth in North America.
Nike Brand revenues were $11.0 billion, down 4 percent on a reported and currency-neutral basis, Revenues for Converse were $263 million, down 28 percent on a reported and currency-neutral basis, due to declines across all territories
Nike Brand wholesale revenues were $6.8 billion, down 1 percent on a reported and currency-neutral basis, primarily due to declines in Greater China, partially offset by growth in North America. Nike Direct revenues were $4.1 billion, down 8 percent on a reported basis and down 9 percent on a currency-neutral basis, due to a 13 percent decrease in Nike Brand Digital and a 5 percent decrease in NIKE-owned stores.
Earnings declined 2.1 percent to $712 million, or 48 cents a share, ahead of analysts’ consensus target of 44 cents.
Profits benefited from an improvement of 60 basis points in gross margin, to 42.8 percent, due to from supply-chain cost management and favorable FX, partially offset by higher discounts and channel mix. SG&A declined 3 percent, reflecting continued expense discipline despite increased marketing investment around the World Cup.
On an analyst call, Elliott Hill, president and CEO, said the first quarter was in line with Nike’s provided guidance. He said the brand’s Sport Offense strategy, marked by a shift away from generic demographic categories and back to a sport-led, athlete-focused approach, continues to drive strong results across Performance categories, which collectively grew in the high-single digits and was led by double-digit in running and global footwear.
However, those categories make up only about 35 percent of Nike’s sales, and the gains couldn’t offset steep declines in Nike Sportswear, Jordan Brand, and Greater China. Hill said of those businesses, “We’re taking deliberate actions to strengthen those businesses, but realizing the full benefit of those efforts will take time.”
Sportswear Looks to Fine-Tune Customer Segmentation
Sportswear, representing “just under” half of Q1 revenue, fell into the low double digits. Hill said the decline was caused in part by a deliberate reduction in Dunk revenue, which fell nearly 50 percent and created an approximately $200 million headwind. Some older, high-volume sportswear footwear underperformed, and that has consequently impacted sportswear’s future orders as Nike needs to clear excess inventories.
Finally, Hill attributed the sales decline in the quarter to broader weak demand for lifestyle offerings. He said, “Overall, there’s a lack of energy in the lifestyle space right now, which is impacting traffic. Yes, the consumer is cautious. But as the leader in the industry, it’s on us to bring more creativity to sportswear.”
Among the positives within sportswear, Hill said “several major franchises are healthy and growing.”
Air Force 1 is now seeing a “stable full-price business through new dimensions and seasonal materials and colors.” A few sportswear footwear franchises, led by running-inspired silhouettes P-6000 and the Vomero 5, are delivering “strong” double-digit gains. The launch of Studio Fleece for women was the best-performing apparel collection of the quarter in all of Nike, Inc. Hill said, “The common thread across these successful franchises is clarity. They know exactly who they are serving. That’s the lesson. The sportswear consumer isn’t one audience. It’s a collection of consumers with distinct needs, tastes, and motivations.”
The sportswear business is expected to benefit from the launch of a new “Pace” restructuring program that will include layoffs and other moves to reduce costs, but also an organizational realignment to extend the consumer-led Sport Offense focus across categories and geographies. (More details on the Pace initiative can be read here.)
Hill said the sportswear assortments will be organized like the performance business, around specific consumer insights and distinct style preferences.
“We’re breaking down the sportswear business into smaller areas of focus to create a more diverse product portfolio and a more differentiated marketplace,” the CEO said. “We’ll see less of a sea of sameness that’s hurting the lifestyle marketplace across our brands and our competitors right now. That’s how we believe we’ll move from managing a few successful sportswear franchises to building a deep bench of winners across the entire marketplace.
Jordan Brand Seeks to Restore Scarcity
Jordan Brand, representing about 13 percent of Nike’s global revenue, saw sales decline mid-teens in the quarter.
Hill said the Jordan brand has too much retro product in the marketplace with inventory reductions planned. Hill said, “We’re going to get back to leading the scarcity model that we created. Simply put, we’ve been oversupplying our iconic retro product, asking them to do too much. As we’ve done with the Air Jordan 1, we will deliberately reduce the volume and frequency of specific Jordan retro launches.”
He said North America “will feel the biggest impact” in the near term and discussions are underway with wholesale partners. Hill elaborated, “Here’s why we’re doing this. When consumers see the Jumpman, it should feel special. It should feel earned. Every decision we’re making is designed to ensure the Jordan Brand remains as coveted a decade from now as it has been for the past several decades.”
Hill also said efforts to “dimensionalize” the Jordan brand through sport is helping drive growth in cleats, golf and training.
China Faces Lengthy Turnaround in Shift to Premium Selling
Greater China made up 10.5 percent of global revenues in the quarter, with the 26 decline in the first quarter partly tied to a new distribution model.
Hill said China has installed a new leadership team over the past six months and is implementing an extensive marketplace reset, first announced in July, to “clean up the digital side of this market” and ultimately reduce discounting pressures. As reported, Nike is terminating online distribution deals with major third-party retailers like Topsports and Pou Sheng starting January 1, 2027 and concentrating online sales on fewer flagship storefronts, including Nike’s official stores on Tmall, JD, Douyin, Nike.com, and the Nike app.
“We are eliminating distribution through channels that are not aligned with our marketplace strategy, which will decrease the deep discounting of our brands,” said Hill. He said Nike will be working with wholesale accounts to elevate the in-store experience.
He added, “We believe a tightened digital ecosystem of Nike flagships will enable a more premium brand presentation with clearer product stories and a more connected consumer journey. The focus will allow our top partners to concentrate on creating inspirational brick-and-mortar retail experiences. The majority of our partners’ physical doors in Greater China have not been refreshed in the past seven years. When we elevate retail experience and lead with sport, we see results.”
He noted that in Shanghai, Nike’s House of Innovation has delivered 10 consecutive months of growth since undergoing an upgrade. Hill added, “In the near term, revenues and profitability in China will be impacted. We expect our digital cleanup to take multiple seasons as we continue to take targeted actions with our partners to improve inventory levels. Taken together, Nike Sportswear, Jordan Brand, and Greater China represent significant work ahead.”
Performance Remains Nike’s Bright Spot
Nike’s sales across its performance portfolio grew high single digits in Q1. Excluding the reset in Greater China, Nike performance would have been up low-double digits. Running again grew double digits “with consistent share gains,” according to Hill. Global football gained “strong” double digits across geographies, benefiting from the World Cup. Training grew globally, led by EMEIA. Basketball grew double digits in North America. Both tennis and golf also increased double digits.
In running, strength in the Vomero franchise helped “nearly” triple Nike’s share of the max cushioning category over the past year. Hill said the running is entering its “next phase” for Nike with recent launches including the Pegasus Plus 2, Alphafly 4, Swooshfly and Nike Apex.
In global football, Nike doubled its World Cup team kits sales compared to the 2022 tournament. Hill said, “One of our strategies going into the tournament was to use the energy to invest in a much-needed refresh of the global football marketplace. This quarter, the newly elevated marketplace helped drive stronger sales in our club football kits this quarter, which was up in the high teens. That is critical because club football fans buy season after season.”
In training, Nike Motiva has “quickly become one of our top-selling franchises, Nike Pro and Metcon remain “industry icons,” and a new Nike Hybrid Footwear system supporting running and strength movements was just introduced.
In basketball, Nike’s launch of Caitlin 1 on Thursday became the largest women’s signature shoe launch in Nike’s history, reaching 5,000 doors, twice the average for a Nike basketball signature shoe. The launch will be supported by its largest Nike product campaign for the holiday season. Hill described women’s basketball overall as “one of our most powerful growth opportunities,” with its women’s signature business catapulting “nearly” 500 percent from FY22 to FY26.
Outlook
Nike’s outlook for the year ended May 31, 2027 calls for :
- Revenues to decline in the high single digits,
- EBIT to decline by more than revenue,
- Adjusted EPS per share in the range of $1.15 to $1.35, which excludes approximately 15 cents of restructuring expenses related to Pace program for fiscal 2027.
Analysts’ consensus EPS estimate for the year had been $1.66. Analysts’ consensus target for sales was $45.3 billion versus $46.4 billion reported in FY26, representing a decline of 3.2 percent.
Nike last provided full-year guidance in June 2024. The company had stopped due to its extensive transformation efforts.
On his first quarterly call, Dave Denton, Nike’s new CFO, said the revenue decline forecast for the year reflects “deliberate” changes in sportswear, the Jordan brand, and China, and that the effects will likely continue into fiscal 2028. Denton said, “While these decisions can dampen near-term top-line results, our focus is on improving the quality of revenue and creating a more sustainable foundation for long-term growth.”
For the current fiscal second quarter, Nike faces about 400 basis points of revenue headwind from tough comparisons, including last year’s “significant promotional activities” during Cyber Week in EMEIA and higher North America sell-in.
The steeper profit decline versus sales in the year reflects pressure on gross margin and fixed cost deleverage associated with lower revenue levels, as well as higher input costs that’s partially offset by expense management.
Denton said, “Our results are below both our expectations and our potential, and we are focused on closing this gap.” He added that guidance was based on a detailed review of the business and was intended to be “reasonable and attainable.”
Denton said more detailed information will be provided at Nike’s upcoming Investor Day, including its longer-term financial framework, investment priorities, and plans for sustainable growth. The event will be held on November 16 and 17.
Finally, Denton emphasized that Nike’s dividend remains a “very significant priority” and that the company intends to maintain and eventually grow it over time.
Image courtesy of Nike
