Nike's revenue fell short of expectations, profits beating forecasts couldn't hide the downward trend, and its stock price plunged!

Nike reported adjusted earnings per share of 48 cents, higher than Wall Street's expected 44 cents. However, revenue was only $11.21 billion, below the market expectation of $11.35 billion, and a 5% year-over-year decline on a currency-neutral basis. Weak revenue was common, with declines in Greater China and Europe, the Middle East, and Africa, with Nike's direct channel revenue dropping by 8%.

This series of performance highlights the severe challenges Nike faces. After years of weak demand and strategic adjustments, Nike's management is trying to revive the growth momentum of the world's largest sportswear company. Gross margin increased by 60 basis points to 42.8%, mainly benefiting from lower warehousing and logistics costs. However, this improvement has not effectively alleviated market concerns about the company's revenue growth prospects.

Nike's full-year outlook is also conservative. The company expects a high single-digit percentage decline in revenue for fiscal year 2027, with adjusted earnings per share expected to be between $1.15 and $1.35, excluding about $0.15 in restructuring costs. Meanwhile, Nike is advancing a major restructuring plan. The company stated that the newly launched "Pace" operating model is expected to save about $2.5 billion in cumulative costs by fiscal year 2031 through supply chain modernization, establishing new campuses in India, and organizational restructuring around three major geographic regions. Nike expects pre-tax expenses related to this plan to total about $1 billion by fiscal year 2031, with about $300 million in fiscal year 2027.

Nike's "sports offense" strategy has made measurable progress in the professional sports business, but it also admits that there is still much work to be done in sportswear, the Jordan brand, and Greater China.

It is worth noting that the market's pessimism toward Nike is already quite strong, making this stock price reaction particularly noteworthy. Nike's short selling ratio exceeds 7% of its outstanding shares, indicating a significant portion of investors are betting on further price declines. This makes the stock extremely sensitive to any signals about whether Nike's transformation is starting to take effect or whether the recovery process is slower than expected.

Nike's stock performance on earnings release days has also declined, with declines in 9 out of the last 12 earnings days and is now moving toward this record. After this earnings release, Nike's stock price fell about 3.5%.

Market Insight:

For investors, the core question is no longer just whether Nike can exceed expectations in single-quarter earnings. More crucially, is whether the transformation plan can ultimately drive the company to achieve sustainable revenue growth, especially in the China market and direct business, while effectively restoring profitability without over-reliance on cost-cutting.