Nike is deepening its restructuring process under the leadership of CEO Elliott Hill. Due to the worsening difficulties faced in the Chinese market, the company announced a plan involving additional job reductions and the reorganization of its global business operations, after forecasting an annual revenue contraction more severe than initially expected.
The projection released on Thursday, the 1st, signals that Nike's obstacles are expected to persist for a few more quarters, with China being a highlight, where sales registered a 26% drop in constant currency during the first quarter. This scenario raised investor apprehension about the pace of recovery led by Hill, resulting in an 8.5% drop in the company's shares during extended trading.
The company has been seeking to restore growth under Hill's administration, focusing efforts on strategic areas, such as the running segment, and improving ties with wholesale retailers. However, analysts point out that the difficulties are largely caused by the insufficient launch of new and attractive products in adequate quantity, which forced an increase in dependence on promotions and discounts.
In addition to reporting first-quarter revenues below analyst expectations, Nike announced changes to its operating model. These measures include staff reduction and a change in the corporate structure from four to three geographical regions: Americas, Asia-Pacific, Greater China, and EMEA.
The company has not yet specified the exact number of positions that will be eliminated as part of this restructuring, but notifications to employees will only begin in 2027. This program, which complements layoffs announced earlier this year, aims to generate estimated savings of around US$2.5 billion by fiscal year 2031, with most of this amount expected in fiscal years 2029 and 2030.
Regarding financial projections, Nike anticipates a revenue decline in the upper single digits for the 2027 fiscal year. On average, analysts estimate a reduction of approximately 2% in annual revenue, according to data compiled by LSEG.