Nike stock slides about 10% on tariffs hit and weak China sales

Nike shares slipped about 10% before the market opened Friday after the sneaker maker reported a quarterly profit decline tied to a projected $1.5 billion hit from tariffs and a slowdown in Greater China. The stock traded around $58, down from a close near $65 as investors digested a sharp earnings decline and continued margin pressure tied to tariffs, inventory cleanups and weak demand in China.

For the second quarter of fiscal year 2026, Nike posted revenue of $12.4 billion, up 1% from a year earlier, while net income fell 32% to $792 million and diluted earnings per share dropped to $0.53 from $0.78. Gross margin fell 300 basis points to 40.6%, weighed down by higher U.S. tariffs and an inventory glut in China. Nike said new tariffs represent about $1.5 billion in annualized incremental product costs. On the earnings call, CEO Elliott Hill emphasized that margin expansion is a top priority as the company repositions its portfolio.

Hill told analysts that the company is in the middle innings of its comeback, with recovery moving at different speeds across regions and businesses. He cautioned that the path forward would not be a straight line but said leadership is acting decisively to accelerate lagging areas, with China at the top of the list. The executive noted that the tempo of improvement will vary, depending on geography and product category, and reiterated a commitment to improving profitability even as Nike continues to reposition its product mix and go-to-market approach.

North America was the bright spot in the quarter, management said, illustrating how the company intends to anchor its turnaround. Revenue in North America rose 9% to $5.6 billion, driven by a 24% surge in wholesale, which offset a 16% drop in Nike Digital. Wholesale growth helped offset digital softness, and management pointed to North America as the model for the company’s ongoing turnaround. Nike direct-to-consumer and wholesale results reflected a broader mix shift as the company continues to unwind excess inventory while prioritizing profitable sell-through. Nike said wholesale overall grew 8% companywide. In the period, the running footwear and apparel category continued to stand out, growing more than 20% for a second straight quarter and recording double-digit gains across Nike-owned stores, digital channels and wholesale.

But results were weaker in Greater China, where Nike direct sales fell 18% and the company’s e-commerce business fared worse with a 36% drop in Nike Digital. Total revenue in China declined 17% to $1.4 billion, and EBIT in the region collapsed 49%. Nike attributed the China weakness to weak store traffic, soft sell-through and an overreliance on promotions that has eroded the brand’s premium positioning. The company also said it is deliberately shrinking parts of its business, including a plan to cut classic footwear franchises by more than $4 billion from peak levels by the end of the fiscal year, which management said will create an estimated $550 million topline headwind in the current quarter.

CFO Matt Friend described the results as resilient, noting that the company managed headwinds from actions taken to reposition its portfolio, resulting in modest year-over-year top-line growth despite the repositioning. The China weakness remains a focal point for the turnaround, and Hill said the firm would continue to accelerate its measures there even as it emphasizes margin expansion across the board.

Investors watched the earnings closely for signs of whether Nike could stabilize gross margins while reducing excess inventory and implementing a more selective product strategy. By Friday morning, the stock had already fallen sharply, reflecting investor concern about the margin hit from tariffs, the size of the China headwinds and the ongoing adjustments to Nike’s business model. Analysts have noted that the company’s North American strength could help cushion the impact of weakness abroad, but the pace and sustainability of the China recovery will likely determine the longer-term trajectory of Nike’s turnaround.

As Nike continues its strategic repositioning, executives stressed that the plan prioritizes profitability and structural efficiency alongside brand-led growth. Hill reiterated that margin expansion remains a central objective, and that the management team will keep iterating on pricing, product mix, and channel strategy to support a durable, multi-year improvement. The company’s guidance for the balance of fiscal year 2026 will hinge on how quickly Greater China can regain momentum and how efficiently Nike can convert its repositioning into sustainable earnings improvement.