Nike stock plunged nearly 10% after the sneaker giant reported sliding profits due to an anticipated $1.5 billion hit from tariffs as well as a slowdown in China.
Shares fell to about $58 before the opening bell on Friday, down from a prior close near $65, as investors digested a sharp earnings decline and continued margin pressure tied to tariffs, inventory cleanups and weak demand in Greater China.
Nike said its revenue in the second quarter of fiscal year 2026 edged up just 1% to $12.4 billion, while net income sank 32% to $792 million. Diluted earnings per share fell to $0.53 from $0.78 a year earlier.
“I’d say we’re in the middle innings of our comeback,” CEO Elliott Hill told analysts on the company’s earnings call Wednesday.
That recovery, Hill cautioned, is moving at different speeds across regions and businesses.
“It won’t be a straight line, but we’re acting decisively to accelerate the lagging areas with China at the top of that list,” Hill said.
Gross margin fell 300 basis points to 40.6%, weighed down by higher US tariffs and a glut of unsold inventory in China.
Nike said new tariffs represent about $1.5 billion in annualized incremental product costs.
“I want to state it very clearly margin expansion is a top priority for me and my leadership team,” Hill said.
The earnings miss came despite solid performance in North America, which management repeatedly pointed to as the model for the company’s turnaround.
North America revenue rose 9% in the quarter to $5.6 billion, driven by a 24% surge in wholesale that offset a 16% drop in Nike Digital.
Wholesale overall grew 8% companywide.
“The geography that is leading the way for Nike right now is North America,” Hill told investors on the earnings call.
“As our largest business that’s where much of our focus has been.”
Nike’s running footwear and apparel category continued to stand out, growing more than 20% for a second straight quarter and posting double-digit gains across Nike-owned stores, digital and wholesale channels.
Matt Friend, Nike’s chief financial officer, said the company’s results showed resilience despite headwinds tied to strategic repositioning.
“Our second quarter results demonstrated the resilience of our portfolio, with modest year-over-year reported top-line growth, despite managing headwinds from the actions we have taken to reposition our business,” Friend said.
That resilience was nowhere to be found in China, where revenue plunged 17% to $1.4 billion and EBIT (earnings before interest and taxes) collapsed 49%.
Nike direct sales in China fell 18%, including a steep 36% drop in Nike Digital, the company’s e-commerce business.
Management blamed weak store traffic, soft sell-through and an overreliance on promotions that has eroded the brand’s premium positioning.
Nike is also deliberately shrinking parts of its business.
The company is on track to cut classic footwear franchises by more than $4 billion from peak levels by the end of the fiscal year, creating an estimated $550 million top-line headwind in the quarter.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
