Nike Hits New Decade Lows After Disappointing Earnings Report
Nike's (NKE) latest earnings report has sent the company to new decade lows after revealing disappointing revenue numbers. Despite beating expectations with a Q1 EPS of $0.48, revenue fell 4% year-over-year to $11.21 billion, just missing consensus estimates.
The company's outlook for FY27 is particularly concerning, with expectations for revenue decline in the high-single-digit range and adjusted EPS projected between $1.15 and $1.35, well below forecasts.
Nike's core issues persist, including a 4% drop in Sportswear revenue, which accounts for nearly half of Q1 revenue. The Jordan Brand saw a mid-teens drop in revenue, while Nike has cut Dunk revenue by nearly 50% and noted that some older, high-volume Sportswear footwear sold below expectations.
Management plans to reduce the launch volume and frequency of Jordan retro products to restore scarcity. North America experienced a 2% growth, aided by strong performances in Running, Global Football, and Basketball, while Greater China faced a significant downturn, falling 26%, with expectations of further revenue declines as Nike continues to address digital distribution and inventory issues.
Nike is accelerating its turnaround strategy with a new operating model aimed at enhancing decision-making, productivity, and reducing costs. The overhaul aims for approximately $2.5 billion in cumulative savings by FY31, alongside around $1.0 billion in pre-tax charges, with maximum savings expected in FY29-FY30.
Management warns that actions affecting Sportswear, Jordan, and China will impact results throughout the year and into FY28. Nike plans to unveil a five-year financial framework at its Investor Day in November.