Nike's fiscal 2027 guidance points to a deeper sales fall than its first quarter

A profit beat built on costs

Nike earned 48 cents a share in the fiscal first quarter [6][8]. That beat the 43 cent consensus but was below the 49 cents it reported a year earlier [6][8]. Revenue of $11.21 billion missed the $11.32 billion analysts expected and fell 4% [6][8].

Gross margin rose 60 basis points to 42.8%, which the company attributed to cheaper warehousing and logistics rather than higher prices [6][8]. Operating overhead fell 6% to $2.7 billion [8]. Operating income was flat [8].

That is a cost story, not a demand story, and the recent record shows how much of Nike's profit now comes from items below the sales line. Gross margin was 40.2% in the third quarter of fiscal 2026, down 130 basis points on North American tariffs [3]. The fourth quarter's $0.72 in earnings per share leaned on a $986 million IEEPA tariff recovery; without it, earnings were $0.20 a share [5][7].

Tariffs remain a live cost. In October 2025 the company said duties would take $1.5 billion and 1.2 percentage points off gross margin in fiscal 2026, up from an earlier forecast of $1 billion and 0.75 points [2].

Investors read the quarter as low quality. Shares fell about 8% after hours on 1 October [6], then closed at $33.87 on 2 October after touching $31.97, a 13-year intraday low [9].

The guidance is the story

The number that moved the stock was not in the quarter. Nike guided to a high single-digit revenue decline for fiscal 2027, which implies a fall of roughly 10% for the rest of the year [8].

Guidance was worse than the quarter itself [8]. Management said operating income would decline by more than revenue, and put adjusted earnings per share at $1.15 to $1.35 against the $1.67 analysts had modelled [8]. Supply cuts in Jordan Brand, Nike Sportswear and Greater China are expected to weigh on the business into 2028 [8].

Analysts had already been cutting. Fiscal 2027 earnings consensus fell from $1.82 ninety days earlier, with five downward revisions in the past 30 days [5]. Bank of America downgraded the stock to underperform on sales risk, while Jefferies kept a buy rating in the hope that wholesale channels stabilise [7].

The shares were down more than 40% for the year by late September [7]. That left them near their lowest level since 2013 [7].

Where the sales went

Greater China did most of the damage. Revenue there fell 22% to $1.18 billion, or 26% excluding currency effects, and regional earnings before interest and taxes dropped 34% to $248 million [6].

Jordan Brand is 13% of the business and fell by a mid-teens percentage [6][9]. Nike Sportswear, just under half of revenue, fell by a low double-digit percentage [6][9]. Dunk revenue dropped nearly 50%, and planned cuts to the sneaker explain part of the sportswear decline [6].

"I think Jordan is an operating issue right now," CFRA Research analyst Zachary Warring said [6]. He expects the brand to stabilise in coming quarters [6]. That is later than CFRA had assumed [6].

There were pockets of growth. North America wholesale rose 10% in the previous quarter, and sales growth at Foot Locker turned positive for the first time in four years [5]. Nike sold 2.5 times as many national team kits for the World Cup as it had at the same point in 2022 [5]. Running has grown at double-digit rates for five consecutive quarters [5].

Pace, and what it costs

The next phase has a name. Pace targets about $2.5 billion in total savings by fiscal 2031 and carries roughly $1 billion in pretax charges over the same period [6]. Layoffs begin in 2027, the third round of cuts this year [6].

Under Pace the company is reorganised into three regions: the Americas, Asia Pacific, and Europe, Middle East and Africa [8]. The earlier Win Now plan had already moved about 8,000 employees into teams organised by sport [5]. Sales have not followed yet [8].

The balance sheet is carrying the load in the meantime. Nike's dividend yield has reached 4.8%, the highest in the Dow Jones Industrial Average, after 24 consecutive years of increases [9]. Dividends paid over the trailing 12 months exceeded free cash flow per share, according to a Motley Fool analysis, which flags the payout ratio as a risk if the trend holds [9].

What happens next

Nike has promised the detail in November [5][8]. Its investor day runs on 16 and 17 November [5][8]. Second quarter revenue will slow from the first, management has warned [5].

The finance side is changing too. Matt Friend is leaving the chief financial officer role after nearly 18 years, and David Denton has been named as his successor [5][7].

Some retailers have cut or cancelled orders for Nike's spring 2027 products, Evercore ISI analyst Michael Binetti said [7]. That would push recovery later still [7].

Nike has not said when sales will bottom [8]. The investor day is the next chance to say so.