Nike met its quarter's guide, then guided the year to adjusted EPS of $1.15-$1.35 against $2.10 reported

The quarter did what the old guidance said it would

Nike's revenue in the August 2026 quarter fell 4% from a year earlier, inside the range the company had set in its previous guidance. Gross margin, the share of each sale left after making and shipping the product, rose as guided, and selling and administrative spending came in below the flat figure it had guided. By the yardsticks the company set for itself, it was a clean quarter.

The year just ended closed against its own annual guides, set on 30 September 2025, as follows. Selling and administrative spending grew 0.2% against guidance of low single-digit growth, and wholesale grew 4% against guidance of modest growth.

The yardsticks then changed. The new chief financial officer, David Denton, said the company would now give a view of the full year and update it as the year went on, and he gave no second-quarter revenue or gross-margin figure on the call. His first range for adjusted earnings per share is $1.15 to $1.35, against $2.10 reported for the year just ended.

The drop is smaller than the headline, and still large

The raw gap with the year just ended overstates the fall. The company said in June that year included a one-time $986 million tariff recovery, and it also carried about $300 million of severance cost, which cuts the other way. Adjusting for both, and assuming a 25% tax rate, the guide implies pre-tax profit 17% to 29% below last year, by our arithmetic.

The company also guided to a revenue decline in the high single digits, and Denton said on the call that EBIT (earnings before interest and taxes) would fall by a bigger percentage. Three months earlier, the previous finance chief had said cost actions taken late last fiscal year would produce positive operating leverage this fiscal year, meaning profit growing faster than sales.

Three businesses are cut back, and Sportswear sells badly

Management said Sportswear, just under half of Nike's revenue, fell by a low double-digit percentage last quarter, and Jordan Brand, a smaller line, by the mid-teens. Part of the Sportswear fall was planned, a deliberate cut to one franchise, and part was shoes selling through below expectations at retailers. Management said it had been oversupplying its best-known retro shoes and will cut the volume and frequency of specific Jordan retro launches.

In June, the chief executive, Elliott Hill, expected improvement in the back half for Sportswear and Jordan Streetwear, a narrower group than the Jordan Brand figure above. He did not repeat that expectation on this call, and Denton said the pain would run through this year and will probably "bleed in a little bit into fiscal '28". Greater China revenue fell 26% excluding currency effects, and Denton said the guidance assumes China gets worse for the rest of the year.

Savings come late, and earnings do not cover the dividend

Nike's answer is a restructuring programme called Pace, with about $2.5 billion of savings, counted cumulatively and arriving mostly in the programme's later years. The one-year profit drop the guide implies is, by our arithmetic, roughly a fifth to nearly two-fifths of the whole saving.

A year of the dividend, annualising the quarterly rate, is 121% to 143% of the adjusted earnings guide, by our arithmetic. Free cash flow in the year just ended was below a year of dividends at the first-quarter rate, by our arithmetic, and that cash included only part of the tariff recovery. Denton said there is support for maintaining and growing the dividend under all scenarios. One reading is that the cushion is the balance sheet, with its cash and short-term investments, though debt takes most of it, with part due within a year, leaving net cash of about $0.5 billion by our arithmetic.

What would have to be true, and what we do not know yet

One way to read the plan is that several things have to hold together. Performance products have to carry on rising while Sportswear, Jordan and China bottom out, and the Pace savings have to outrun what the company chooses to reinvest. We do not know yet whether they will. Denton said the range reflects the company's best assessment today and that a five-year financial algorithm would come at the November Investor Day. That is a reason to wait for the next quarter, not a verdict on it.

Over the last four quarters, counting this one, the company's next-quarter revenue guide was met or beaten, measured against the guide given on the prior call; all but the latest came in better than guided. Its June view of positive operating leverage this fiscal year now sits against a guide of EBIT falling by more than revenue. The near-term guides have held; the longer view has already been rewritten.