Nike Launches Pace Cost Overhaul After Widening Sales Drop
First-quarter revenue fell 4% to $11.2 billion as the company unveiled Pace, an operating-model overhaul it said would save about $2.5 billion through fiscal 2031.
NIKE, Inc. (NKE), the athletic footwear and apparel maker, reported first-quarter fiscal 2027 revenue of $11.2 billion, down 4% on a reported basis and 5% excluding currency, a steeper drop than the 1% reported and 4% currency-neutral decline in the fiscal 2026 fourth quarter.
The company is taking actions to reposition NIKE Sportswear, Jordan Brand and Greater China, and it introduced Pace, an operating-model transformation described as a way to scale the success of its Sport Offense. President and Chief Executive Officer Elliott Hill said the Sport Offense is driving measurable progress across the performance business and that more work remains in Sportswear, Jordan Brand and Greater China. Chief Financial Officer Dave Denton, who took the role in August after succeeding Matthew Friend, said first-quarter results were consistent with expectations, supported by improved gross margin and disciplined cost management.
NIKE Brand revenue was $11.0 billion, down 4% on both a reported and currency-neutral basis, with declines in Greater China and EMEA partially offset by growth in North America. Wholesale revenue was $6.8 billion, down 1% on both bases, reversing a 4% reported increase in the prior quarter. NIKE Direct revenue was $4.1 billion, down 8% reported and 9% excluding currency, reflecting a 13% decrease in NIKE Brand Digital and a 5% decrease in NIKE-owned stores. Converse revenue was $263 million, down 28% on both bases, due to declines across all territories.
Gross margin expanded 60 basis points to 42.8%, primarily due to lower warehousing and logistics costs, after an 890-basis-point increase to 49.2% in the prior quarter that included an approximately 900-basis-point benefit from the expected recovery of IEEPA tariffs. Selling and administrative expense decreased 3% to $3.9 billion. Demand creation expense was $1.3 billion, up 5%, primarily due to higher brand marketing expense tied to investment in key sports events. Operating overhead expense was $2.7 billion, down 6%, primarily due to lower wage-related expense and lower other administrative costs. The effective tax rate was 22.7%, compared with 21.1% a year earlier, primarily due to foreign tax audit settlements. Net income was $0.7 billion, down 2%, and diluted earnings per share was $0.48.
Greater China was the sharpest regional contraction. Revenue there was $1.18 billion, down 22% reported and 26% excluding currency, and EBIT was $248 million, down 34%. North America revenue was $5.13 billion, up 2% on both bases, with EBIT of $1.17 billion, up 3%. EMEA revenue was $3.18 billion, down 5% on both bases, and EBIT was $728 million, down 1%. Asia Pacific and Latin America revenue was $1.46 billion, down 2% reported and 0% excluding currency, with EBIT of $324 million, down 7%. NIKE Brand footwear revenue was $6.95 billion, down 6% on both bases; apparel was $3.38 billion, up 2%.
Inventories were $7.8 billion, down 3%, primarily reflecting shifts in product mix. Cash and equivalents and short-term investments were $8.4 billion, down approximately $0.2 billion, as cash generated by operations was more than offset by cash dividends and capital expenditures. The company returned approximately $610 million to shareholders through dividends, up 3% from the prior year.
Pace includes and builds on the cost realignment plan announced in March 2026. The program includes efforts to modernize NIKE’s global supply chain, establish a new campus in India to fuel enterprise capabilities, realign to three geographies, and further streamline the organization to reduce costs. NIKE expects Pace to deliver approximately $2.5 billion in cumulative savings through fiscal 2031, with approximately $1.0 billion of pre-tax charges, primarily consisting of employee-related costs, through fiscal 2031, in addition to approximately $0.3 billion of severance costs recognized in fiscal 2026. The company expects approximately $0.3 billion of those charges to be recognized in fiscal 2027. The savings estimate is stated before the expected pre-tax charges and any future reinvestment.
For the full fiscal 2027 year, NIKE expects revenues to decline high-single digits. Adjusted diluted earnings per share is expected to be in the range of $1.15 to $1.35, which excludes approximately $0.15 of restructuring expenses related to Pace for fiscal 2027. The effective tax rate for fiscal 2027 is expected to be in the mid-20 percent range, subject to changes in earnings mix and discrete tax items.