Nike exceeded Wall Street's earnings forecast for the first fiscal quarter – but through cost-cutting rather than sales growth. Earnings per share were 48 cents against a consensus of 43 cents. Revenue of $11.21 billion fell short of the $11.32 billion forecast, and net income decreased by 2%.
Revenue dropped 4% to $11.2 billion. The main decline came from Greater China and the Europe, Middle East, and Africa region. In Greater China, revenue fell 22% to $1.18 billion, and excluding currency fluctuations, it dropped 26%, with earnings before interest and taxes down 34% to $248 million. Sportswear, accounting for just under half of the revenue, fell by a low double-digit percentage, partly due to a reduction in the Dunk line, whose revenue decreased by nearly 50%. Revenue from the Jordan Brand, which makes up 13% of the business, fell by a mid-double-digit percentage. CFRA Research analyst Zachary Waring expects Jordan to stabilize later than CFRA anticipated. "I think Jordan is an operational issue right now," he said.
Cheaper logistics raised the gross margin by 0.6 percentage points to 42.8%, whereas last quarter's beat relied on a one-time tariff refund. The Pace reorganization aims for $2.5 billion in savings by fiscal 2031; layoffs will begin in 2027 and will be the third round this year. The adjusted earnings forecast is $1.15–1.35 per share, excluding 15 cents in Pace expenses. Waring called the forecast disappointing but Pace a good start: "Nike can easily earn more than $3 per share if it seriously focuses on efficiency." Eliot Hill took over the company in October 2024. According to Waring, the quarter looked as if Hill had been working for two to three quarters, not two years. Shares fell 8% in after-hours trading and 40% year-to-date. Hoka and On are performing well in the U.S., and in China, Nike may have to compete on price with local brands, which could impact margins.
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