Nike Shares Plunge 10% on Weak Q1 Results and Major Restructuring Plans
Nike shares dropped nearly 10% in pre-market trading on Wall Street after reporting a 4% revenue decline and announcing an extensive restructuring plan.
Nike Shares Plunge Amid Restructuring and Revenue Drop
Nike shares plummeted by nearly 10% in pre-market trading on Wall Street following the release of its first-quarter results and a sweeping restructuring plan. The company is heading toward its worst year in history, having dropped 47% since the beginning of the year. Quarterly revenue fell 4% compared to the previous year to $11.21 billion, missing analyst forecasts that stood at $11.33 billion.
The company noted that revenue is expected to continue declining for the rest of the year at a high single-digit rate. According to a report in The Wall Street Journal, the sportswear giant plans to scale down operations and cut jobs following two consecutive quarters of revenue decline. CEO Elliott Hill wrote in a memo to employees that these moves will lead to a reduction in headcount starting in 2027.
"These moves will lead to a reduction in the number of jobs at Nike. We still don't know how many positions will be eliminated or in which locations," Hill wrote.
Strategic Missteps and Growing Competition
Hill started his career at Nike as a sales intern in 1988 and returned from retirement to become CEO in October 2024. He has focused on returning the company to retailers after a heavy pivot to direct-to-consumer sales, but he also has to contend with a slowdown in China—the company's second-largest market after the US—and mounting competition from smaller brands like Hoka and On.
Additional challenges hit the company last week when French football star Kylian Mbappé announced the end of his contract with Nike to move to Switzerland-based On. Last month, the company was also dropped from the S&P 100 index.
Efficiency Plan and Long-Term Savings
The planned layoffs follow previous cuts in January, when the company slashed nearly 800 warehouse jobs, and in April, when it eliminated about 1,400 corporate headquarters positions. Nike stated that the new efficiency plan is expected to save the company about $2.5 billion by 2031.
At the same time, Nike expects to record pre-tax restructuring charges of $1 billion during this period, primarily for severance and other employee-related costs, on top of approximately $300 million in severance expenses recorded in the fiscal year that ended in May.
