Core Points

• Nike reports declining revenue, and its performance forecast falls short of investors' expectations, causing its stock price to plummet.
• The company has already carried out two rounds of layoffs this year and has announced that it will initiate a new round of layoffs in 2027.
• Citi analysts stated in a research report on Friday: 'Nike is becoming a company that survives by cutting costs.'

Nike's stock price continued to fall on Friday, marking the second consecutive trading day of decline. Previously, the company released its financial report for the first quarter of fiscal year 2027, along with a pessimistic outlook for its performance.

The sports apparel giant disclosed on Thursday that its revenue in the first fiscal quarter fell by 4% to $11.2 billion; business revenue in the Greater China region declined, while growth in the North American segment partially offset this. Net profit for the quarter was $712 million, a 2% decrease from last year's $727 million.

Nike President and CEO Elliott Hill stated in the announcement, "There is still much room for improvement in Nike's Sport Life line, the Jordan brand, and our business in Greater China. We are taking prudent measures to strengthen these businesses in the right way for long-term development."

Nike expects its revenue to decline by a high single-digit percentage in the fiscal year 2027. On Friday morning, Nike's stock price fell by about 6%; the cumulative decline since the beginning of this year is nearly 45%.

The company has also launched a new operational model named “Pace (Rhythm)”, with the goal of achieving cost savings of $2.5 billion by 2031, and plans to further lay off employees starting from 2027.

Hill wrote in an internal announcement to employees on Thursday: "This reform will result in a reduction of overall positions at Nike. I am aware that such news brings uncertainty, and I take it very seriously." "Decisions regarding the affected positions will not be made until 2027 and beyond."

The reform project also includes: upgrading the global supply chain, reorganizing into three major regional business segments, building a new industrial park in India, and further streamlining the organizational structure to reduce costs.

"Cost reduction becomes the main theme"

Nike has already implemented two rounds of layoffs this year: in January, 775 positions were cut at its distribution centers in the United States; in April, another 1,400 employees were laid off, mainly from the technical department.

Citi analysts released a research report on Friday, maintaining a 'neutral' rating on Nike due to sales guidance falling short of market expectations.

"Nike is evolving into a cost-cutting narrative. Management has launched a $2.5 billion cost-cutting plan to address the huge real pressures faced by its sports lifestyle line, the Jordan brand, and its business in China," wrote a Citibank analyst.

Analysts mentioned that management will disclose more five-year outlooks during the Investor Day event, but it will not be until 2029 that we can truly see substantial results from the Pace reforms.

"Nike has the potential to exceed current guidelines, but in our view, Nike should not enjoy a valuation premium over its peers," added the analyst.