Global sportswear giant Nike saw its shares tumble after reporting a significant drop in quarterly profits, dragged down by persistent challenges in the crucial Chinese market and the impact of higher US tariffs.
Financial Results Show Mixed Performance
The company announced its financial results for the second quarter of its fiscal 2026 year on Thursday, revealing a 32 percent decline in profit to $792 million compared to the same period last year. Overall revenues saw a marginal increase of one percent, reaching $12.4 billion.
While the performance in North America was a strong point, and the running franchise delivered robust results, the figures were overshadowed by a steep decline in Greater China. Sales in that region plummeted by 17 percent, a clear signal that the brand's recovery efforts there are not yet gaining sufficient traction.
China Struggles Demand a "Fresh Perspective"
Nike's Chief Executive Officer, Elliott Hill, acknowledged the difficulties, stating that improvements in China are "not happening at the pace we like." He emphasized that the company stands "in the middle innings of our comeback" and is planning major product launches around 2026 events like the Olympics and the World Cup.
To address the China problem head-on, Hill has reorganized his executive team, ensuring the division's chief now reports directly to him. "It's going to take a fresh perspective, a new approach," Hill stated, committing to return Nike to its status as a "beloved, premium and innovative brand in China."
Tariffs and Inventory Challenges
Chief Financial Officer Matthew Friend pointed to additional pressures on the business. He confirmed that higher US tariffs are expected to cost the company a full-year impact of $1.5 billion, a projection that remains unchanged from September.
On a positive note, Friend reported that the company's inventory situation in North America has improved compared to previous quarters, where an excess of merchandise had squeezed profit margins. However, he admitted that more action is needed in China to "break the cycle" of underperformance.
Market analysts reacted cautiously to the report. Neil Saunders of GlobalData noted that while Nike is making progress, the results "underline how much work remains to be done." He pointed out that Nike remains behind in casual and fashion trends and that its brand is "not connecting culturally" in China as effectively as some rivals.
The immediate market reaction was severe, with Nike shares falling 10.5 percent in after-hours trading following the earnings announcement.
