U.S. duties and weak demand in China hit Nike's earnings. Shares plummeted 11%

Sportswear and footwear maker Nike reported a drop in sales in China and gave a weak outlook for the current quarter, leading to a sell-off in shares in extended trading on Dec. 18. Investors are disappointed that the business recovery is taking longer than they had hoped. That said, Nike's profit and revenue last quarter beat Wall Street's expectations thanks to higher sales in North America.

Sportswear maker Nike reported that its revenue in the Greater China market fell 17% to $1.42 billion in the second quarter of fiscal 2026, ended Nov. 30.

Nike is also feeling the impact of higher duties, CNBC noted. On Thursday, the company said its gross margin shrank 3 percentage points and its inventory fell 3 percent - mostly due to higher duties.

For the second quarter in a row, the Converse sub-brand showed weak results: its revenue fell 30% year-on-year after a 27% decline in the previous reporting period.

Nike expects revenue to decline by a "low single-digit percentage" (about 1-3%) in the current quarter, with moderate growth projected in North America, Bloomberg wrote, citing statements from Nike CFO Matt Friend in a call with analysts.

Investors after the publication of Nike reports began to actively sell shares: their quotations fell by 11% - below $59. In the afternoon trading before that the shares fell in price by only 0.1% - to $65.63.

Despite the setback in China, Nike had an overall strong quarter. Revenue in the second quarter of fiscal 2026 rose 1% from the same quarter last year to $12.43 billion versus the $12.22 billion forecast of analysts compiled by LSEG, CNBC writes. Adjusted EPS came in at $0.53 versus expectations of $0.38.

Weak revenue in China was overshadowed by sales in North America, which rose 9% to $5.63 billion. The company said wholesale revenue for the quarter rose 8% to $7.5 billion, but direct sales, which Nike had been focusing on before the arrival of new CEO Elliot Hill, fell the same 8% to $4.6 billion

Despite weakness on some fronts, Nike.com had the best Black Friday in the company's history, Nike said.

The results show that while Nike is making progress, investors are demanding more and want answers on areas of the business that are still lagging, Bloomberg writes. The company still has not provided a long-term outlook, indicating that it is not yet in full control, including in the process of rebuilding ties with retail partners, the agency said.

"The direct-to-consumer and China categories disappointed and we need to hear more about when things will get better. Otherwise, results were solid," said Poonam Goyal, senior analyst at Bloomberg Intelligence.

Nike CEO Elliot Hill and CFO Matt Friend said the company is "midway" in its recovery from the recession. It will take longer to improve business in China, where Nike is facing price cuts and weak response to assortments. "We're just getting started, but it's not happening at the speed and scale needed for systemic change," Hill said.

The company has been under his leadership for just over a year. Hill's strategy is to regain growth and market share, reduce stale merchandise and develop the wholesale channel, CNBC writes.

Since the beginning of the year, Nike shares have fallen in price by just over 13%. According to MarketWatch, most analysts tracking the sneaker maker's securities advise buying them: Nike has 25 Buy and Overweight ratings out of 38 combined. Another 11 analysts recommend holding the securities in a portfolio, and only two suggest selling.

The Wall Street consensus target price is $83.1, up 26% from the closing price of major trading on Dec. 18.

This article was AI-translated and verified by a human editor