Nike has intensified its restructuring efforts under CEO Elliott Hill, revealing plans on Thursday to eliminate more jobs and reorganize its global business divisions due to an unexpected and significant projected decline in annual revenue.
During the initial two years of Hill’s leadership, the company aimed to rejuvenate growth by concentrating on key sports like running and improving its relationships with wholesale retailers.
However, the disappointing revenue forecast highlights that Nike’s challenges are likely to persist for several more quarters. This is particularly evident in China, where sales dropped 26% on a constant-currency basis in the first quarter, raising concerns among investors regarding the effectiveness of Hill’s turnaround strategy.
According to analysts, Nike’s struggles largely derive from a perceived lack of new and appealing products, which has led to increased promotions and discounts. Following this news, Nike’s shares saw a 4% decline in after-hours trading.
The company, which also fell short of projections for first-quarter revenue, announced alterations to its operational framework, which include job reductions and a reorganization into three geographic regions—Americas, Asia Pacific and Greater China, and EMEA—down from four. Additionally, it plans to establish a new campus in India to tap into local talent.
Nike has not yet specified how many positions will be affected, but plans to inform employees about changes starting in 2027.
This restructuring initiative is part of a broader effort that aims to achieve approximately $2.5 billion in savings through fiscal 2031. Nike anticipates a decline in revenue in the high-single digits for fiscal 2027, contrasting with its earlier expectation of a low-to-mid-single-digit decline in the first half of that fiscal year.
China sales decline continues
China, once a significant source of profit for Nike, has displayed notable weakness in recent quarters, as both international competitors and local sportswear brands gain ground. This trend has heightened investor anxieties about the company’s recovery efforts.
The region represents about 15% of Nike’s total annual revenue and ranks as its third-largest market after North America and Europe, the Middle East, and Africa. Sales in China have decreased for nine consecutive quarters.
Recently, Nike announced that starting in January, it would revoke online sales rights from some of its largest retail partners in China—a risky move that aims to restore tighter control over pricing and distribution in hopes of improving its business outlook.
“Nike does not have a channel problem in China, but rather a product problem,” noted BNP Paribas senior analyst Laurent Vasilescu in a research note. His surprise at the company’s swift decision to shut down online wholesale operations in China adds to the mixed reactions among analysts.
Despite the possibility that these measures may help combat excessive discounts, there are doubts about whether they will persuade Chinese consumers to come back to the brand.
S&P Dow Jones Indices removed Nike from the S&P 100 index in September, marking the company’s exit after an 18-year presence in this group of blue-chip firms.
In its first-quarter earnings report, Nike announced sales of $11.2 billion, slightly below the analyst consensus estimate of $11.32 billion, based on data from LSEG. Yet, its gross margin improved by 60 basis points to 42.8% for the quarter ending August 31, supported by lower warehousing and logistics expenses.
