Nike met its quarter's guide, then guided FY27 adjusted EPS to $1.15-$1.35, under $1.58 earned ex-recovery

Nike met the quarter's guide, then lowered the bar

Nike did what it said it would in the August 2026 quarter. Revenue fell, inside the low-to-mid single-digit decline the company had guided in June, and gross margin edged up as guided. That is a habit: in each of the last four quarters, gross margin came in within or better than what the preceding call had guided.

Then the new chief financial officer, David Denton, said Nike would now give a view of the full year, and offered a range: adjusted earnings per share of $1.15 to $1.35. Last year's reported earnings were lifted by a one-time tariff recovery. Without it, Nike said, earnings per share would have been $1.58. Against that figure the new range is 15% to 27% lower, by our arithmetic. That figure also still carries severance cost that the adjusted measure leaves out.

Put both years on the same footing and the gap widens

The two bases differ, so we rebuilt them. Take last fiscal year's pre-tax profit, remove the tariff recovery and add back $385 million of severance cost, per its annual report, and the result is $3.3 billion. By our arithmetic, the new range implies pre-tax profit 19% to 31% lower, assuming a tax rate of a quarter, inside the company's guided band, and the latest share count. The June call put the severance at nearly $400 million, which leaves the gap unchanged, and the October release gives about $0.3 billion, a figure we cannot reconcile with the annual-report one, which would make it 17% to 29%.

Range assumes China worsens; Sportswear, Jordan pressured

Denton said the range assumes China's revenue gets worse over the rest of this fiscal year, as Nike takes actions to reset the marketplace, including clearing out unprofitable online distribution there. In June the company had said China's near-term trend would stay in line with recent performance. Last quarter Greater China revenue fell 26% excluding currency effects, a deeper fall than the quarter before.

Sportswear and Jordan are the other half. In June the company said both would improve in the back half of this fiscal year. On the latest call the chief financial officer said the pressure runs through the rest of the year and will probably spill a little into the next, and the improvement line was not repeated. Meanwhile Nike is deliberately cutting its own supply of Jordan retro and some Sportswear footwear to reset the market.

The savings arrive after the profit has fallen

The company's answer is a restructuring programme called Pace: about $2.5 billion of cumulative savings over five years, most of them landing well after this fiscal year. By our arithmetic, this year's like-for-like pre-tax profit falls by roughly a quarter to two-fifths of the whole programme's savings. That sets one year's drop against the savings total, stated before charges and reinvestment, and neither the call nor the release put an amount on the reinvestment.

How last year's annual guides ended: selling and administrative spending, guided to grow by low single digits, grew 0.2%, below guidance; wholesale, guided to return to modest growth, grew 4% excluding currency effects (6% reported, according to Nike's full-year release), meeting guidance; and NIKE Direct, which the company said it did not expect to return to growth, fell, as guided.

What cannot be tested yet

A new finance chief has reason to set a low first bar, and Denton's own description fits: he called the range reasonable and attainable on the information the company has today. That is our reading, not a finding. Charges sit in an excluded adjusted line. The release says Pace builds on the March cost plan, and lists last year's severance separately from Pace's charges; adjusted EPS leaves both out, while last year's base carries the severance.

What we do not know is the gross-margin range, since Denton said the company would probably not guide it, how the savings phase in, since no year-by-year savings were given on the call or in the release, and how much worse China gets. The next tests are the investor day in November and the next quarterly results.

In March Nike said it would return to full-year guidance at the investor day in the fall; it has done so ahead of the November investor day, and the number it chose is the one it will be measured against. What it guides now shows how much room it has left itself.