Nike stock slides about 10% on tariff hit and China slowdown

Nike shares fell about 10% in early trading Friday after the sneaker maker reported its second-quarter results for fiscal 2026, with a projected $1.5 billion hit from tariffs and softer demand in Greater China. The company posted revenue of $12.4 billion in the quarter, up 1% from a year earlier, but net income declined 32% to $792 million, and diluted earnings per share were $0.53, down from $0.78. The stock traded near $58 before the market opened, well below a close around $65 the previous session.

“I’d say we’re in the middle innings of our comeback,” CEO Elliott Hill told analysts on the earnings call, acknowledging that the recovery is moving at different speeds across regions and businesses. He said the leadership team is acting decisively to accelerate lagging areas, with China at the top of the list, and that margin expansion remains a top priority.

The company attributed the margin squeeze to higher tariffs and a buildup of inventory in China, reporting a gross margin of 40.6%, a decrease of 300 basis points year over year. Nike said new tariffs add about $1.5 billion in annualized incremental product costs. CFO Matt Friend described the results as resilient despite headwinds tied to the repositioning effort.

North America remained the chart leader in the quarter, with revenue up 9% to $5.6 billion as wholesale grew 24% offsetting a 16% decline in Nike Digital. Across the company, wholesale rose 8% while Nike Digital fell in the high single digits.

In Greater China, the slowdown intensified. Revenue in China fell 17% to $1.4 billion, and EBIT declined 49%. Direct-to-consumer sales in China fell 18%, including a 36% drop in Nike Digital, underscoring ongoing challenges from soft store traffic, promotions that dilute pricing power and an emphasis on repricing and inventory management as part of the turnaround.

Nike is deliberately shrinking parts of its business, with a plan to cut classic footwear franchises by more than $4 billion from peak levels by the end of the fiscal year. The move is expected to create about a $550 million top-line headwind in the current quarter as the company repositions the portfolio.

Analysts noted the stock’s sensitivity to tariff policy and China exposure, but the company’s North America performance and the rebound in running footwear and apparel—running gear grew more than 20% for a second straight quarter—offer some upside if the broader macro backdrop improves.

Looking ahead, Nike said it will press ahead with its turnaround, focusing on North America, running footwear and apparel, and refining its direct-to-consumer and wholesale mix as it navigates tariff costs and China volatility. Investors will watch for updates on the pace of margin expansion and progress in the China market.