Nike problems continue to grow

Nike’s CEO, Elliott Hill, has been working to address several issues since taking on the role two years ago, including a DTC strategy that had gone too far and an overly generous distribution strategy that flooded the market with some of Nike’s core footwear franchises.

At the time, Hill said the solution was to “see more of Nike being Nike,” which meant refocusing the organization on sport, accelerating product innovation, resetting core footwear franchises, and reigniting relationships with wholesale partners.

The company had already cut about 2% of its workforce earlier that year and announced additional layoffs in 2025, amounting to less than 1% of its workforce, as Hill restructured the company around key sports versus consumer demographics.

Nike’s Problems Grow

Nike’s latest earnings report included another operational reset, which calls for an unspecified number of layoffs in the new year, and the company’s problems have now grown to include more than just DTC and oversupplied franchises.

John Donahoe, who led the retailer’s ill-fated DTC push, had touted “strong growth” across Nike, Jordan, and Converse at the end of fiscal 2023, but three years later, Converse, China, and the Jordan brand are all declining in the double digits.

Hill said on the company’s latest earnings call that “taken together, Sportswear, Jordan Brand, and Greater China represent significant work ahead,” but the company knows what healthy looks like and is taking deliberate actions to get there.

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Nike‘s sportswear segment, which includes some of its largest footwear franchises, was down low double-digits in the retailer’s most recent quarter, representing a little under half of the retailer’s revenue in the quarter.

Hill said the decline reflected a combination of deliberate actions, product underperformance, and broader marketplace pressure, including the reduction of Dunk revenue by almost 50%, which excised $200 million from the division’s top-line in Q1.

Challenges in China

Greater China kicked off Nike’s fiscal 2027 with another 22% decline, and the company has announced plans to restore the region to growth, including new leadership and a plan to reset its online distribution model in China.

Nike will sell through the Nike app and website in China, and on Nike flagship experiences on Tmall, JD.com, and Douyin, aiming to create “a more premium brand presentation with clearer product stories and a more connected consumer journey.”

The company will also invest in local product creation in China, with the first collection made specifically for the Chinese consumer launching this month, and will focus on the brick-and-mortar experience in China, noting that many of its partners have not refreshed their stores over the past seven years.

Declines in Greater China will be “even worse the remainder of the year,” according to Needham analysts, and the region is likely to be impacting Nike well into fiscal 2028.

As part of the Pace restructuring program, Greater China will join a larger group in fiscal 2028 that also contains Asia Pacific. BNP Paribas Equity Research analyst Laurent Vasilescu noted that this will give analysts less visibility into trends in China.

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The Jordan Brand, which made up about 13% of Nike’s business in the quarter, was down roughly 20% from its fiscal 2024 benchmark by the end of fiscal 2026, and revenue fell again in Q1, this time by the mid-teens.

Nike plans to pull back on both the volume and frequency of retro Jordan launches to restore balance to the marketplace and create a foundation for more profitable and sustainable growth.

Hill said that “when consumers see the Jumpman, it should feel special, it should feel earned,” and every decision the company is making is designed to ensure the Jordan Brand remains as coveted a decade from now as it has been for the past several decades, with Hill noting that the company will “restore balance to the marketplace” for the Jordan brand.

Nike’s performance business has seen strong growth, and revenues were up slightly in Nike’s largest region of North America, but the company’s sportswear and Jordan brand segments, which account for roughly 63% of the company’s revenues, need to be turned around for a full recovery, and Hill has acknowledged that progress must be made in these areas for a turnaround to happen.

The company’s digital cleanup in China will take multiple seasons, and they will work with partners to improve inventory levels, which will help to restore the region to growth.

The Jordan Brand made $8.7 billion in fiscal 2024, but it was down roughly 20% from that benchmark by the end of fiscal 2026, and in Q1, revenue fell again, this time by the mid-teens.