Nike is expanding its restructuring under CEO Elliott Hill with further job cuts and a new three-region operating model after forecasting a high single-digit revenue decline for fiscal 2027.
The sportswear giant said it does not yet know how many roles will be eliminated, with affected employees expected to be notified from 2027. The latest restructuring builds on earlier layoffs and is expected to generate about US$2.5 billion in savings through fiscal 2031, with most of the savings coming in fiscal 2029 and 2030.
Nike will also reduce its geographic divisions from four to three, covering the Americas, Asia Pacific and Greater China, and Europe, the Middle East and Africa. It plans to establish a new campus in India focused on capabilities and access to talent.
The changes came as Nike reported another weak quarter, particularly in China, where sales fell 26% on a constant-currency basis. Revenue for the quarter ended Aug 31 declined about 4% to US$11.21 billion, below analysts’ US$11.32 billion estimate.
Nike shares fell 8.5% in extended trading following the results.
“Our Nike performance business is not yet large enough to offset the pressure we’re seeing in Nike sportswear, Jordan brand, and Greater China,” Hill said.
He added that reviving those businesses “will take time”, while Nike is deliberately reducing the number of Jordan retro launches.
Nike has been trying to revive growth by focusing on sports such as running and rebuilding relationships with wholesale retailers. However, analysts have pointed to a shortage of compelling new products, which has contributed to heavier discounting and promotions.
China has been a particular weakness, with sales falling for nine consecutive quarters. The market contributes about 15% of Nike’s annual revenue and is its third-largest region after North America and Europe, the Middle East and Africa.
Nike plans to remove online sales rights from some of its largest Chinese retail partners from January as it seeks greater control over pricing and distribution. Hill said the digital restructuring would take “multiple seasons”, with revenue and profitability expected to face pressure in the near term.
“Nike does not have a channel problem in China, but rather a product problem,” said BNP Paribas senior analyst Laurent Vasilescu.
North America, Nike’s largest market, provided some support, with sales rising 2% on a constant-currency basis. Hill attributed the growth partly to its performance business and World Cup-related demand.
The company also faces the loss of French football star Kylian Mbappe, who ended his two-decade partnership with Nike in September to join Swiss rival On.
Nike’s gross margin improved 60 basis points to 42.8% during the latest quarter, helped by lower warehousing and logistics costs.
However, analysts remain cautious over the restructuring. GlobalData managing director Neil Saunders said the changes raised questions over whether Nike’s existing operating model had been fit for purpose.
Reuters
