Key Takeaways
- Nike’s fiscal Q1 revenue fell 4% to $11.21 billion, while gross margin rose 60 basis points to 42.8% and EPS of $0.48 beat estimates.
- Management guided fiscal 2027 revenue down by a high single digit rate, with adjusted EPS of $1.15 to $1.35.
- Moody’s moved its outlook to negative, and the stock now trades above the average analyst target of $36.50.
- The November 16 to 17 Investor Day must show how Pace’s $2.5 billion in savings turns into earnings growth.
Nike (NKE) is asking investors for patience at the exact moment its creditors are running short on it.
Moody’s moved its outlook on Nike to negative on October 15 while affirming the A2 rating, citing a turnaround that is taking longer than expected. S&P had already cut Nike to A with a negative outlook earlier in the month.
The stock has absorbed every blow. Shares closed at $37 on October 23, down 2.7% on the day and 39.5% year to date, a few dollars above the 52-week low of $32.
Oddly, the bull case and the bear case now point at the same date. Nike’s Investor Day on November 16 and 17 is supposed to explain how a shrinking company starts growing again.
A beat that still shrank
Fiscal Q1 cleared a low bar. Revenue fell 4% to $11.21 billion, slightly below the $11.32 billion consensus, while EPS of $0.48 beat the $0.43 estimate.
The split by region and brand tells the real story:
- North America revenue rose 4% to $5.13 billion.
- Greater China fell 26% on a currency-neutral basis.
- Converse dropped 28%, and Nike Direct fell 8% to $4.1 billion.
CEO Elliott Hill was blunt in the earnings release: “We have more work to do in NIKE Sportswear, Jordan Brand and Greater China.”
Guidance confirmed it. Nike expects fiscal 2027 revenue to fall by a high single digit rate and adjusted EPS of $1.15 to $1.35, excluding about $0.15 of Pace costs.
Here’s how sharply annual revenue has rolled over:
Forward estimates still point lower before they point higher, so the reset is far from finished.
What Pace is supposed to buy
Pace is Nike’s plan to rebuild its cost base around the Sport Offense strategy. It includes a modernized supply chain, a new campus in India and a regrouping into three geographies: the Americas, EMEA, and Asia Pacific and Greater China.
Charges total about $1 billion, with roughly $300 million landing in fiscal 2027. The payoff is about $2.5 billion in cumulative savings through fiscal 2031, though most arrives in fiscal 2029 and 2030.
That timeline matters. Investors are paying today for savings that sit three to four years out, while revenue keeps shrinking in the meantime.
Gross margin is where the early evidence should appear first…
Q1’s 60 basis point gain came from cheaper warehousing and logistics, so Pace could push it further once the new supply chain is in place.
Rivals are not waiting. Adidas (ADS) raised its full-year profit outlook this week after a record quarter, and Lululemon (LULU) just hired a Nike veteran to run its product team.
TIKR tracks 42 analysts on Nike. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Nike, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Nike’s Analyst Ratings
A yield that looks too generous
The valuation is where the story gets uncomfortable. At $37, Nike trades at 28.4x NTM earnings, which is rich for a company guiding to lower sales.
Analysts seem to agree. The average Street target is $36.50, slightly below the current price, and Berenberg cut the stock to sell this month.
Then there is the dividend. Nike returned about $610 million through dividends in Q1, and the yield now sits at 4.4% with a 78.4% payout ratio.
Compare what Nike pays out with what the business actually generates:
If earnings land at the low end of guidance, that cushion gets thinner while Pace charges are still flowing through.
My take: Nike’s brand still wins in running and performance, and North America growth shows the reset can work. But the stock already prices in a recovery that the guidance does not yet show. I would wait for concrete Investor Day targets before treating a 4.4% yield as a bargain.
The November 17 main-stage webcast is the checkpoint. Nike needs to give a margin target and a date for revenue growth, then back both up in the December 17 Q2 report.
So what is Nike stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
