Nike, for decades one of the most powerful names in global sportswear, is confronting a prolonged slowdown that has erased roughly $230 billion from its market value from its peak and forced the company into another sweeping restructuring as it attempts to revive sales and regain consumer excitement.
The latest warning came with Nike’s fiscal first-quarter results. Revenue for the quarter ended August 31 fell around 4 per cent to $11.2 billion, while net income declined 2 per cent to $712 million. The company expects revenue to fall by a high-single-digit percentage during fiscal 2027, a considerably weaker outlook than investors had anticipated.
Shares under pressure
Investors responded sharply to the outlook, with Nike shares dropping as much as 8.5 per cent in extended trading following the results. The latest fall adds to a prolonged decline that has substantially reduced the sportswear giant’s valuation.
Nike’s market value has fallen dramatically from its peak, with estimates putting the erosion at roughly $230 billion. Its stock has also fallen more than 40 per cent this year, reflecting concerns over how quickly chief executive Elliott Hill can turn around the company.
Hill returned to Nike in October 2024 after retiring from the company four years earlier. His mandate was to restore product innovation, repair relationships with wholesale retailers and revive the brand’s momentum. Two years into his tenure, however, several of the problems he inherited remain unresolved.
Product problem
At the heart of Nike’s difficulties is its product portfolio. The company built its dominance around products that crossed the boundary between sport and fashion — Air Force 1, Dunk, Cortez and Air Jordan among them — but dependence on established franchises left it exposed as consumer tastes shifted.
Nike’s performance categories, including running, have shown signs of progress, but the improvement has not been sufficient to offset weakness in Nike Sportswear, Jordan Brand and Greater China. Hill has acknowledged that restoring those areas will take time.
The company is also deliberately reducing some Jordan retro launches, seeking to avoid flooding the market and diminishing their exclusivity. Converse has meanwhile endured a prolonged contraction, adding another weak spot to the group’s portfolio.
At the same time, younger and more specialised competitors have made significant inroads. Brands such as On and Hoka have challenged Nike in running, while a more crowded lifestyle footwear market has given consumers alternatives to the company’s traditional franchises.
China troubles deepen
Greater China has emerged as perhaps Nike’s most serious geographical challenge. Reported revenue in the region fell 22 per cent in the latest quarter to about $1.2 billion, while the currency-neutral decline was 26 per cent. It marked the ninth consecutive quarter of falling sales in China.
Domestic sportswear companies have strengthened their position, while Nike has struggled with changing consumer preferences and widespread discounting. The company is now attempting another overhaul of its distribution model, including withdrawing online selling rights from some major retail partners in China from January.
The strategy is intended to give Nike greater control over pricing, distribution and the presentation of its products. But changes to sales channels alone may not address the broader challenge of restoring product momentum and consumer demand.
Direct-sales strategy backfires
Another factor behind Nike’s difficulties has been its aggressive push towards direct-to-consumer sales. The strategy was designed to increase margins and give the company greater control over its relationship with shoppers, but it also reduced Nike’s dependence on wholesale retailers.
That left the brand less visible in some stores just as competitors were gaining momentum. Nike has since reversed course and begun rebuilding relationships with wholesale partners.
The latest numbers underline the imbalance. Nike Direct revenue fell 8 per cent, while digital sales were particularly weak. North America, where wholesale performance has been comparatively stronger, recorded growth, offering one of the few bright spots in the quarterly results.
Another restructuring
Nike is now responding with a multi-year transformation programme called Pace. The company plans to streamline its organisation, restructure its global supply chain and consolidate its geographical divisions into three broad regions — the Americas; Asia Pacific and Greater China; and Europe, Middle East and Africa.
The programme is expected to deliver around $2.5 billion in cumulative savings through fiscal 2031. Nike has warned that the restructuring will result in fewer jobs, although it has not yet disclosed how many positions will be eliminated. Decisions affecting employees are expected to begin in 2027.
Nike also plans to establish a new campus in Bengaluru as part of the restructuring, describing India as a long-term investment in capabilities and talent.
Turnaround still unfinished
There are some encouraging indicators. North American sales increased 2 per cent on a currency-neutral basis, gross margin improved to 42.8 per cent, and inventories declined as Nike continued to clean up excess stock. But those improvements are being overshadowed by weakness in China, lifestyle footwear and parts of the Jordan and Converse businesses.
Nike’s challenge is consequently larger than cutting costs. The company that turned athlete endorsements, innovative footwear and the Swoosh into one of the world’s most recognisable consumer brands must again produce products that shoppers actively seek out.
Its restructuring may make the organisation leaner, but the larger test will be whether Nike can restore the combination of innovation, sporting credibility and cultural relevance that made “Just Do It” one of the most successful formulas in consumer-brand history.