Nike shares drop 10% as China sales plunge, tariffs hit profits

Nike shares fell more than 10% in premarket trading on Friday morning, as concerns about its performance in China outweighed the sportswear giant's earnings beat.

On Thursday, Nike posted quarterly earnings and revenue that topped Wall Street's estimates, as strength in North America helped to offset a plunge in China sales.

The stock movement comes as investors digest the weakness reported in China and the sustained hit Nike is taking from higher tariffs.

Nike share price

Here's what Nike reported for its second fiscal quarter of 2026, according to consensus estimates from LSEG:

The athletic apparel retailer said sales in North America rose 9% to $5.63 billion. But revenue in its Greater China market dropped 17% to $1.42 billion.

Shares of German athleisure giants Adidas and Puma also took a small hit on Friday morning, as concerns about Nike's performance spilled over to companies across the Atlantic.

Investors in Western consumer discretionary companies, like sportswear and luxury goods makers, are closely monitoring the shape of the critical Chinese market, where consumer demand has been volatile for some time after slowing sharply in the wake of the Covid-19 pandemic.

Adidas reported 10% growth in China revenues in its third-quarter earnings report. In its third-quarter earnings report, Puma said sales in the Asia Pacific region fell 9% due to a "significant decline" in the Greater China wholesale business.

Nike is just over a year into CEO Elliott Hill's turnaround strategy, focusing on regaining its growth and market share, clearing out old inventory and investing in wholesale relationships.

"Fiscal year '26 continues to be a year of taking action to rightsize our classics business, return Nike digital to a premium experience, diversify our product portfolio, deepen our consumer connection, strengthen our partner relationships and realign our teams and leadership," Hill said on a call with analysts. "And I say we're in the middle inning of our comeback."

"We're nowhere near our potential," he added.

Hill said Nike's improvements in its China market are "not happening at the level or the pace we need to drive wider change," though he said the country remains one of the company's most powerful long-term opportunities.

Nike expects fiscal third quarter revenues to fall by a low single digit percentage, with modest growth in North America. It also anticipates gross margins will drop 1.75 to 2.25 percentage points – including a 3.15 percentage point hit from tariffs.

The company said wholesale revenues climbed 8% to $7.5 billion during the quarter. But direct sales — which were a focus for Nike in the years before Hill took over and moved away from the strategy — fell 8% to $4.6 billion.

Nike has also been feeling the impact of tariff increases. It said Thursday that its gross margin decreased by 3 percentage points and inventories dropped 3% primarily due to higher tariffs.

The sneaker company has been reporting weakness in its Converse brand, too. In its first fiscal quarter, Nike said Converse sales dropped 27% – on Thursday, it reported a 30% drop in revenues for the sneaker brand.

Despite the weakness in some parts of Nike's business, the company highlighted some areas of strength and new initiatives ahead. CFO Matt Friend said on the call that Nike.com posted its best Black Friday ever this year, partially driven by its Air Jordan "Black Cat" launch.

Nike also plans to launch a new footwear platform in January called Nike Mind, which aims to help athletes prepare for performance and competition, Hill said on the call.

Nike has been making larger internal changes under Hill.

Earlier this month, Nike underwent leadership changes to "remove layers," according to Hill. Under its "Win Now" strategy, the company announced that Chief Commercial Officer Craig Williams would leave the sneaker giant.

Hill called the shakeup a move "about growth and offense."

"Collectively, these changes amount to us eliminating layers and better positioning Nike to continue to have an impact the way only Nike can," Hill said in a statement at the time.

Nike shares were already down more than 13% this year-to-date at Thursday's close.

In a note following the earnings update, Citi analysts said Nike's performance in China weighed on their expectations for the company's broader recovery.

"Management expects 2Q China weakness to continue for the remainder of [2026] as they reset the market place (which will take time)," they said. "This keeps us cautious on the [2027] recovery and highlights the complicated turnaround underway."