01—Abstract
Summary
Summary of the 8-K filed October 1, 2026. Cited figures are marked; the original filing is the authoritative source.
NIKE reported fiscal Q1 2027 (quarter ended August 31, 2026) revenue of $11.2 billiona, down 4% reported and down 5% currency-neutral.
Gross margin expanded 60 basis points to 42.8%, driven by lower warehousing and logistics costs, and selling and administrative expense fell 3% to $3.9 billionb. Diluted EPS was $0.48 versus $0.49 a year ago, with net income of $712 million down 2%. Pre-tax income was flat at $921 million, and the decline in net income reflects a higher effective tax rate of 22.7%, which included foreign tax audit settlements.
Demand was weak in Greater China (revenue down 22%c, EBIT down 34%), Converse (down 28%), and NIKE Direct (down 8%, with NIKE Brand Digital down 13%). North America grew 2%, and wholesale revenue was down only 1%. The central new item is "Pace," a multi-year enterprise operating model transformation that builds on the March 2026 cost realignment.
Management expects roughly $2.5 billiond in cumulative pre-tax savings through fiscal 2031, stated before charges and any reinvestment. Pace involves approximately $1.0 billion of new pre-tax charges, mostly employee-related, on top of about $0.3 billion of severance already recognized in fiscal 2026. About $0.3 billion is expected in fiscal 2027, with the remainder through fiscal 2031.
Pace also includes a new campus in India, a realignment into three geographies, and supply chain optimization. Management is also repositioning NIKE Sportswear, Jordan Brand, and Greater China. Fiscal 2027 guidance is weak at the top line: revenue is expected to decline high-single digits.
Adjusted diluted EPS is guided to $1.15 to $1.35, excluding about $0.15 of Pace restructuring expense, and the effective tax rate is expected in the mid-20% range. Balance sheet metrics are mixed. Cash and short-term investments were $8.4 billion, down about $0.2 billion, and total debt fell to about $7.9 billion ($2.0 billion current, $5.9 billion long-term) from roughly $8.0 billion a year earlier, with the current portion reflecting near-term maturities.
Inventories declined 3% to $7.8 billion, and dividends of about $610 million were paid, up 3%. Investors will likely focus on whether the savings materialize, whether revenue stabilizes in Greater China and digital, and whether the restructuring charges prove to be a cost of a durable margin recovery.
02—Key points
Key Highlights
- Q1 FY27 revenue of $11.2B, down 4% reported and 5% currency-neutral; NIKE Brand wholesale down 1%, NIKE Direct down 8%, Converse down 28%.
- Gross margin up 60 bps to 42.8%, mainly from lower warehousing and logistics costs; SG&A down 3% to $3.9B, with operating overhead down 6% and demand creation up 5%.
- Diluted EPS $0.48 vs. $0.49 prior year; net income $712M (down 2%) as the effective tax rate rose to 22.7% from 21.1%, partly due to foreign tax audit settlements.
- Greater China is the main drag: revenue down 22% (down 26% currency-neutral) and segment EBIT down 34%; North America grew 2%.
- Pace program targets ~$2.5B cumulative pre-tax savings through FY2031 (before charges and reinvestment), against ~$1.0B of new pre-tax charges plus ~$0.3B of FY26 severance already taken.
- FY27 guidance: revenue down high-single digits; adjusted diluted EPS $1.15–$1.35 excluding ~$0.15 of Pace restructuring; effective tax rate in the mid-20% range.
- Liquidity and capital return: cash and short-term investments $8.4B; total debt about $7.9B; inventories down 3% to $7.8B; dividends of ~$610M (up 3%) returned in the quarter.
03—Questions
Frequently Asked Questions
What is Pace, and how much will it cost and save?
Pace is a multi-year enterprise operating model transformation that builds on the March 2026 cost realignment. NIKE expects about $2.5 billion in cumulative pre-tax savings through fiscal 2031, stated before charges and future reinvestment. It is expected to involve about $1.0 billion of new pre-tax charges, mainly employee severance and related costs, in addition to roughly $0.3 billion of severance recognized in fiscal 2026. About $0.3 billion is expected in fiscal 2027, with the remainder through fiscal 2031. Management notes that these figures are estimates that may change, and that local labor laws could delay execution.
Why did net income fall more than pre-tax income in the quarter?
Pre-tax income was flat at $921 million, but net income fell 2% to $712 million because the effective tax rate increased to 22.7% from 21.1%. The company attributed the increase primarily to foreign tax audit settlements recognized in the current year, which are typically non-recurring, so the tax rate may not persist at this level.
How weak is the outlook for fiscal 2027?
Management expects revenue to decline by high-single digits in fiscal 2027, a meaningful deterioration from the 4% decline in Q1. Adjusted diluted EPS is guided to $1.15 to $1.35, excluding about $0.15 of Pace restructuring expense. The guidance implies that margin improvement from cost actions and gross margin gains must offset a sizable revenue decline to keep earnings in that range.
Which parts of the business are struggling, and what is management doing about it?
Greater China is the weakest region, with revenue down 22% (26% currency-neutral) and EBIT down 34%. Converse revenue fell 28%, and NIKE Brand Digital fell 13%. EMEA footwear dropped 11%. Management said it is taking deliberate actions to reposition NIKE Sportswear, Jordan Brand, and Greater China, while the Sport Offense performance franchise continues to show momentum.
Is NIKE's balance sheet and dividend under pressure?
Cash and short-term investments declined about $0.2 billion to $8.4 billion, as operating cash flow did not fully cover dividends and capital expenditures. Total debt is about $7.9 billion, down from about $8.0 billion a year earlier, though $2.0 billion is now current and due within a year. Dividends of about $610 million were paid in the quarter, up 3%, and dividends declared per share were $0.41, up from $0.40. Inventory fell 3% to $7.8 billion, which supports working capital.
04—Continue