Nike's shares fell nearly 9%: revenue fell short of expectations

Nike's shares fell nearly 9% in premarket trading on Friday after the sportswear giant released mixed results for the first quarter of its fiscal year. The company beat Wall Street's forecast on adjusted earnings per share, but revenue came in below expectations, with pressure persisting across several key areas of the business.

Nike's adjusted earnings per share came in at 48 cents, compared with analysts' expectations of 44 cents. The company's revenue totaled $11.21 billion, below Wall Street's forecast of $11.35 billion. Excluding the impact of currency fluctuations, revenue declined 5% year-over-year.

The revenue decline was broad-based. Sales fell in both Greater China and the EMEA region, which covers Europe, the Middle East and Africa. In addition, Nike Direct revenue, which includes the company's direct-to-consumer sales, dropped 8%.

The results present additional challenges for CEO Elliott Hill, who has been working to revive Nike's growth following several years of softening demand and the company's strategic overhaul.

Meanwhile, the company's gross profit margin rose 60 basis points to 42.8%. The improvement was mainly driven by lower warehousing and logistics costs. However, the margin gain failed to divert investors' attention from concerns over the company's revenue trends.

Nike's annual guidance also came in relatively weak. The company expects revenue to decline in the high-single-digit percentage range in fiscal 2027. Adjusted earnings per share are projected in the range of $1.15-$1.35, excluding an approximately 15-cent charge related to restructuring.

At the same time, Nike is launching a new large-scale restructuring effort. The company is rolling out a new Pace operating model, under which it plans to achieve total savings of approximately $2.5 billion by fiscal 2031. The program includes modernizing the supply chain, establishing a new campus in India, and reorganizing the company around three geographic regions.

Nike projects that restructuring costs related to the program will total approximately $1 billion by fiscal 2031, including roughly $300 million in fiscal 2027.

According to Elliott Hill, the company's "Sport Offense" strategy is already delivering measurable results in sports products. However, he also noted that Nike still has more work to do in Sportswear, Jordan Brand, and Greater China.

The sharp reaction in the stock is particularly notable given that investor sentiment toward Nike already reflects significant pessimism. More than 7% of the company's free-float shares are held in short positions, indicating that a substantial share of investors are positioned for a further decline in the stock.

Under these conditions, Nike's share price movements could be especially sensitive to both signs of an accelerating recovery and signals that the business turnaround will take longer than expected.