Nike Shares Drop 10% after the company reported its fiscal second-quarter results, as a steep decline in China sales and ongoing tariff pressures weighed on investor sentiment. The drop came despite Nike posting earnings and revenue that exceeded market expectations, highlighting the complex balance between regional performance, cost pressures, and long-term strategic shifts.
The results underscore the challenges global brands face when growth in one major market offsets weakness in another, while external cost factors continue to affect profitability.
Strong North America performance offsets regional weakness
Nike reported earnings per share of 53 cents, well above expectations, with revenue reaching $12.43 billion for the quarter. Growth in North America played a key role in supporting overall performance. Sales in the region rose 9 percent to $5.63 billion, reflecting steady consumer demand and improved execution across product lines and channels.
In contrast, Nike’s Greater China business saw a significant decline. Revenue in the region dropped 17 percent to $1.42 billion, continuing a trend of softness that has concerned investors. Management acknowledged that progress in China is slower than needed to drive broader momentum, even as the company maintains a long-term view of the market’s potential.
The mixed regional results contributed to a cautious outlook from investors, helping explain why Nike Shares Drop 10% in reaction to the quarterly report.
Tariffs and margins remain a key challenge
Beyond regional sales performance, tariffs continue to be a major headwind for Nike’s profitability. The company reported a decline in gross margins during the quarter, citing higher tariff-related costs as a primary factor. Nike said its gross margin fell by about three percentage points, with tariffs accounting for a significant portion of the pressure.
Looking ahead, the company expects margins to face further compression in the next quarter. Nike anticipates a decline of between 1.75 and 2.25 percentage points, including a tariff-related impact of more than three percentage points. These cost pressures are shaping near-term expectations and influencing how leadership prioritizes pricing, sourcing, and inventory decisions.
Inventories declined modestly during the quarter, reflecting efforts to streamline operations and better align supply with demand.
Leadership focuses on turnaround and channel strategy
Chief executive Elliott Hill is a little over a year into a broader turnaround effort aimed at restoring growth and market share. The strategy includes clearing older inventory, diversifying the product portfolio, and rebalancing Nike’s sales channels.
A key shift has been a renewed emphasis on wholesale partnerships. Wholesale revenue rose 8 percent to $7.5 billion during the quarter, while direct sales declined 8 percent to $4.6 billion. The move marks a change from Nike’s earlier focus on direct-to-consumer channels, as leadership looks to strengthen relationships with retail partners and expand reach.
Hill described the current fiscal year as one focused on execution and realignment, with changes underway across teams, leadership structure, and operating priorities. Recent internal leadership changes were framed as an effort to simplify decision-making and position the company for faster growth.
Brand performance and forward initiatives
Not all parts of Nike’s brand portfolio performed equally. The Converse brand continued to face challenges, with revenue declining 30 percent during the quarter, following a steep drop in the previous period. The company is reviewing strategies to address the sustained weakness.
At the same time, Nike highlighted areas of momentum and innovation. Digital performance during key shopping periods showed strength, and management pointed to upcoming product platforms designed to support athlete preparation and performance.
For entrepreneurs and business leaders, Nike’s quarter illustrates the importance of regional balance, cost discipline, and adaptive channel strategies. While near-term pressures remain, the company’s leadership continues to focus on structural changes intended to support long-term competitiveness in a shifting global market.
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