Nike’s Restructuring Efforts Intensify Amid Financial Headwinds

The athletic apparel giant Nike is deepening its corporate overhaul, announcing the elimination of hundreds of logistics positions across the United States. This move comes as the company navigates a challenging business climate characterized by shrinking margins, weakness in China, and a stock price that has lost more than half its value over a three-year span. Investors are left questioning whether the announced cost-saving initiatives will be sufficient to engineer a sustainable recovery.

The pressure on Nike is starkly evident in its equity performance. While the S&P 500 has advanced approximately 2% since the start of the year, Nike shares are down roughly 1%. Trading around $63, the stock's trajectory reveals a prolonged downturn:
* A decline exceeding 50% over the past three years.
* A drop of approximately 52% on a five-year basis.

Despite the significant price depreciation, the company's valuation metrics remain elevated:
* Market Capitalization: ~$96 billion
* Price-to-Earnings Ratio: 38
* Dividend Yield: ~2.5%
* 50-Day Moving Average: ~$64
* 200-Day Moving Average: ~$64–$67

Latest Round of Job Cuts Targets Distribution

The company is cutting 775 jobs at its US distribution centers, with a focus on locations in Tennessee and Mississippi. This follows a prior round of restructuring last summer, which saw around 1,000 corporate office positions eliminated.

Management frames these actions as essential for streamlining costs and realigning the supply chain. The stated objectives include:
* Reducing complexity while boosting operational flexibility.
* Accelerating the adoption of technology and automation.
* Consolidating the network of distribution locations.
* Establishing a foundation for long-term profitable growth.

David Swarz, an analyst at Morningstar, views the cuts as a logical step. He notes that sales trends over the last two years have been notably weaker than typical, suggesting Nike may have overbuilt warehouse capacity and staffing during its earlier direct-to-consumer push.

Financial Results Highlight an Incomplete Turnaround

The company's second fiscal quarter figures underscore the scale of the challenge. CEO Elliott Hill, who assumed the role in 2024, remarked in December that the company was in the "middle innings" of its comeback, indicating the turnaround is far from complete.

Should investors sell immediately? Or is it worth buying Nike?

Key Q2 metrics showed significant strain:
* Net income fell 32% year-over-year to $792 million.
* Diluted earnings per share also dropped 32% to $0.53.
* Gross margin contracted by 300 basis points to 40.6%.
* Revenue in Greater China plummeted 17%.
* Direct-to-consumer sales declined by 8%.

Wholesale Provides a Glimmer of Hope

Amid struggles in direct sales and China, the wholesale channel showed resilience. Revenue from wholesale partners grew 8% compared to the prior year. This signals a deliberate effort to re-engage with important brick-and-mortar retail, a shift from the previous strategy under ex-CEO John Donahoe, who heavily prioritized direct sales and loosened some partnerships.

Analyst Sentiment Remains Divided

Market experts are divided in their assessments of Nike's prospects, as reflected in a wide range of recent price targets:
* BTIG Research: "Buy" rating with a $100 price target.
* Robert W. Baird: Lowered target from $93 to $85, maintains "Outperform" rating.
* Daiwa Capital Markets: Reduced target from $75 to $61.
* Deutsche Bank: $67 price target.

CFO Matt Friend has characterized fiscal 2026 as a "transition year," with the company contending with both temporary and structural headwinds. For the ongoing third fiscal quarter, Nike anticipates a low single-digit percentage decline in revenue. The gross margin is forecast to fall by 175 to 225 basis points.

External Tariff Pressures Compound Margin Woes

Beyond internal restructuring, external factors are weighing on profitability. Increased tariffs in North America are significantly impacting margins. The company estimates these tariffs will pressure the third-quarter gross margin by approximately 315 basis points. Absent this effect, Nike would have projected a margin increase rather than a decrease.

Inventory levels recently stood at $7.7 billion. While unit volume decreased by 3%, the value remained elevated due to tariffs and higher product costs inflating inventory values. The pace at which Nike can reduce excess stock at acceptable margins has thus become a critical factor for financial performance during this transition period.