Nike Shares Fall 10% Amid Weak Revenue Forecast and Layoff Plans

Declining Revenues and Layoff Plans

Nike's stock fell sharply on Friday, marking a second consecutive day of losses after the company disclosed a 4% decrease in its fiscal first-quarter revenue, amounting to $11.2 billion. This decline was attributed to weaker performance in Greater China, even though growth was noted in North America. The company's net income also saw a slight decrease, dropping to $712 million from $727 million in the previous year.

In an effort to address these challenges, Nike announced its plans to lay off staff starting in 2027. CEO Elliott Hill emphasized the need for improvement in key areas such as NIKE Sportswear, Jordan Brand, and Greater China. Nike anticipates a revenue decline in the high-single digits for 2027, causing shares to drop nearly 45% since the beginning of the year.

Nike introduced a new operating model called "Pace," which aims to achieve $2.5 billion in cost savings by 2031. This strategy includes restructuring the supply chain and establishing a new campus in India. Previous layoffs earlier in the year have already affected 2,175 employees, with cuts in both distribution and tech sectors.

Analysts from Citi have indicated a neutral stance on Nike, citing the company's sales guidance as below market expectations. They noted that while there is potential for Nike to outperform some forecasts, there is little justification for the company to maintain a premium valuation compared to its peers.

Nike plans to provide further details on its long-term strategy during an upcoming investor day, though the implications of the "Pace" initiative may take years to fully materialize.

This article is for information only and is not investment advice.