Nike Unveils "Pace" Restructuring as Sales Slide Persists Into Third Year of Turnaround

Nike reported another quarter of falling sales on Thursday and unveiled a new multiyear restructuring program, called Pace, that will push the sportswear giant to a three-region operating model and a new technology hub in India as Chief Executive Elliott Hill's turnaround effort stretches into its third year.

The company's first-quarter fiscal 2027 results, covering the three months ended August 31, showed revenue of $11.2 billion, down 4 percent from a year earlier on a reported basis and down 5 percent on a currency-neutral basis. Diluted earnings per share came in at 48 cents, as net income fell 2 percent to $700 million. Shares fell sharply in after-hours trading Thursday and extended their decline into Friday's session, as investors weighed the revenue miss against a restructuring plan whose full costs will not be clear for years.

The numbers

Nike's results, filed with regulators in an exhibit to an 8-K filing, showed weakness concentrated in the same places that have dogged the company for more than two years: Greater China, Europe, and Nike's lifestyle lines. Among the key figures:

• NIKE Brand revenue: $11.0 billion, down 4 percent, on declines in Greater China and Europe, Middle East & Africa that outweighed growth in North America
• Wholesale revenue: $6.8 billion, down 1 percent; NIKE Direct (digital and owned stores) revenue: $4.1 billion, down 8 percent, with digital sales down 13 percent
• Converse revenue: $263 million, down 28 percent, with declines "across all territories"
• Gross margin: 42.8 percent, up 60 basis points, on lower warehousing and logistics costs; selling and administrative expense down 3 percent to $3.9 billion
• Inventories: $7.8 billion, down 3 percent; cash and short-term investments: $8.4 billion, down about $200 million

The company returned roughly $610 million to shareholders through dividends in the quarter, up 3 percent from a year earlier. Looking ahead, Nike said it expects fiscal 2027 revenue to decline by a high-single-digit percentage, with adjusted diluted earnings per share of $1.15 to $1.35 — a figure that excludes about 15 cents of restructuring costs tied to the new Pace program.

How Nike got here

The quarter is the latest data point in a sales slump that predates Hill's return to the company. Nike brought back the 36-year company veteran as president and chief executive in October 2024 to reverse a strategy under his predecessor, John Donahoe, that had leaned heavily on direct-to-consumer digital sales and newer lifestyle franchises at the expense of wholesale relationships, sport-specific performance product and innovation. Hill has since pushed a "Win Now" plan built around what the company calls its "Sport Offense" — reorganizing around sports categories such as running, training, basketball and football rather than around genders or lifestyle silos, and rebuilding ties with wholesale partners that had been starved of fresh product.

That rebuild has come with repeated rounds of job cuts and management changes. Nike eliminated roughly 775 roles in January as it leaned into supply-chain automation, then cut about 1,400 more positions in April as part of changes to its global operations organization, concentrated in technology and operations roles across North America, Europe and Asia. In June, the company announced a planned transition in its finance leadership, bringing in former Pfizer finance chief Dave Denton as chief financial officer in August, replacing Matt Friend. Pace, which Nike disclosed alongside Thursday's results, folds in and expands a cost-realignment plan the company had already flagged in March, and layers on a new pledge to modernize its global supply chain, consolidate enterprise functions into a new campus in India, and collapse its current regional structure into three geographies — the Americas, a combined Asia Pacific and Greater China unit, and Europe, the Middle East and Africa — starting in fiscal 2028.

Nike expects Pace to generate about $2.5 billion in cumulative savings through fiscal 2031, against roughly $1.0 billion in pre-tax charges — mostly severance and other employee-related costs — through the same period, on top of about $300 million in severance already recognized in fiscal 2026 tied to the March plan. The company expects to book a further $300 million of Pace-related charges in the current fiscal year.

Who is affected

The restructuring's heaviest near-term impact falls on Nike's own workforce, particularly in supply-chain, operations and technology functions that have already absorbed several rounds of cuts this year, including corporate staff at the company's sprawling campus near Beaverton, Oregon, and on employees whose roles will shift as the company consolidates into three geographic units and builds out its new India hub. Investors have borne a longer-running cost: Nike shares have traded well below their 2021 highs for most of this year, and the stock slid again after Thursday's report, touching some of its lowest levels in well over a decade. Wholesale partners who sell Nike product, and suppliers in the regions being realigned, face a period of continued uncertainty about ordering and inventory as the new operating model is phased in. Converse's steep 28 percent revenue decline also points to pressure on that unit's retail partners and licensees.

What they're saying

Nike executives framed the quarter as consistent with their own expectations even as they acknowledged continued weakness in specific categories and markets.

"The Sport Offense is driving measurable progress across our performance business, and we introduced Pace to help us accelerate and scale that momentum across NIKE. We have more work to do in NIKE Sportswear, Jordan Brand and Greater China, and we're taking deliberate actions to strengthen those businesses the right way for the long-term," said Elliott Hill, President and Chief Executive Officer of NIKE, Inc.

Denton, in his first quarterly results since taking over as finance chief, struck a similar note of discipline over disappointment. "We delivered first quarter results consistent with our expectations, supported by improved gross margin and disciplined cost management," he said in the earnings release. "As we move forward, we remain focused on strengthening the health of our product portfolio, improving productivity across the enterprise and allocating resources with discipline to support long-term shareholder value."

Trade press coverage of Nike's prior quarter captured the tone that has carried into this one. At a conference call over the summer, Hill told analysts the company's performance "aren't there yet," adding: "We know we're not living up to our full potential, particularly in Nike Sportswear and Jordan Streetwear, where sell-through remains challenged, impacting both current discounting and the future order books."

What happens next

Nike said it expects to recognize the bulk of Pace's roughly $1 billion in pre-tax charges over the next several years as it phases in the new geographic structure by fiscal 2028 and builds out its India campus, with the pace and scope of individual job reductions to be detailed as the plan is implemented market by market. The company has pointed to an investor day this fall, where executives are expected to lay out further detail on the strategy behind Pace and the next phase of the Sport Offense push. For the current fiscal year, management's own guidance — a high-single-digit revenue decline and adjusted earnings per share of $1.15 to $1.35 — implies that the pressure in Greater China, Europe and Nike's lifestyle franchises is expected to persist for at least several more quarters, leaving Hill's turnaround, and the market's patience with it, still very much a work in progress. Nike's next scheduled quarterly update, covering the holiday-quarter period, will be the first real test of whether Pace's early moves are translating into the sales stabilization the company has promised for more than a year.