NIKE, Inc. (NKE) Earnings & Analysis

Latest quarter

NIKE reported Q1 FY2027 revenue of $11.2 billion, below the consensus of $11.4 billion, while adjusted EPS of $0.48 exceeded the consensus of $0.43. The filing shows revenue declined −4.33% from $11.7 billion a year earlier, while diluted EPS declined −2.04% from $0.49.

The company said lower revenue in Greater China, EMEA and Converse drove the currency-neutral revenue decline, partly offset by North America. NIKE said NIKE Direct revenue fell to $4.1 billion from $4.5 billion, reflecting lower digital and store sales, while NIKE Brand wholesale revenue was $6.8 billion in both periods. Gross margin increased to 42.8% from 42.2%, which NIKE attributed primarily to lower warehousing and logistics costs. Free cash flow was −$64.0 million, compared with $15.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Elliott Hill said NIKE’s performance portfolio grew high single digits in the quarter, but Sportswear, Jordan Brand and Greater China continued to pressure consolidated results. He said Sportswear, which accounted for just under half of quarterly revenue, declined low double digits as NIKE reduced Dunk revenue, encountered product underperformance in some higher-volume footwear and faced broader marketplace pressure. Hill said excess Sportswear inventory and lower sell-through had affected future wholesale order books.

Hill said NIKE plans to reduce the volume and frequency of certain Jordan retro launches, with North America expected to feel the largest near-term effect. He also said Greater China revenue declined 26% as NIKE cleaned up its digital marketplace, eliminated distribution through channels that did not align with its strategy and sought to reduce discounting. Hill said this China cleanup would take multiple seasons and would affect revenue and profitability in the near term.

Denton said gross margin rose in the quarter because of supply-chain cost management and foreign-exchange benefits, partly offset by increased discounts and channel mix. He said NIKE would not provide gross-margin guidance for the year, citing supply-chain and sourcing actions that support margin alongside marketplace-reset discounts that reduce it.

Analysts asked about the outlook for China, gross margin and the timing of PACE. Denton said the fiscal 2027 outlook assumes China’s revenue trend worsens from Q1 for the rest of the year because of the company’s actions. He said PACE savings had begun to appear in Q1 through supply-chain actions, while the largest savings are expected in fiscal 2029 and fiscal 2030. Denton said NIKE would not provide regional guidance and would not quantify annual gross-margin guidance.

Guidance

NIKE initiated fiscal 2027 guidance and expects revenue to decline high-single digits. The company expects adjusted diluted EPS of $1.15–$1.35, excluding approximately $0.15 of PACE restructuring expenses. NIKE expects EBIT to decline by a greater percentage than revenue, SG&A to remain down year over year and its effective tax rate to be in the mid-20 percent range. The company expects approximately $300.0 million of PACE operating expenses in FY2027.