Nike Faces Rough Patch: Job Cuts and Falling Sales

Nike just shared a gloomy outlook for the coming year. The company says its total revenue could drop by a high-single-digit percent in fiscal 2027. Earlier they thought the dip would be only low-to-mid-single-digit for the first half of that year. The news sent shares down a bit in after-hours trading.

Sales in China have been weak for a long time. In the first quarter they fell 26% compared to the same period last year, using constant-currency numbers. This marks the ninth straight quarter of decline. Nike is responsible for about 15% of its yearly income from China, making it the third biggest market after North America and Europe-Middle-East-Africa. To try to fix things, Nike will stop letting some big Chinese online partners sell its products starting in January. The idea is to gain tighter control over price and distribution. Analysts argue the real issue is not where the shoes are sold but what Nike is offering.

As part of a broader shake-up, Nike will move from four geographic units to three: the Americas, Asia Pacific and Greater China, and Europe-Middle-East-Africa. The shift comes with job cuts, though the exact number and roles are still unknown. Employees will start hearing about the cuts in 2027. The company also plans to open a new campus in India, hoping to tap into local talent. All of these moves are expected to save about $2.5 billion by the end of fiscal 2031.

Despite the revenue worries, Nike's gross margin actually rose in the quarter that ended August 31. It went up 60 basis points to reach 42.8%, thanks to lower costs in storage and shipping. The reported sales for the first quarter were $11.2 billion, a little shy of the $11.32 billion analysts had predicted. In September, S&P Dow Jones took Nike out of the S&P 100 index after it had been there for 18 years.