It’s not just athletes bailing on Nike — Wall Street is, too
Nike’s (NKE) latest earnings beat wasn’t enough to stop a sell-off, with shares of the sneaker giant suffering their steepest one-day decline since April.
Investors brushed aside stronger-than-expected earnings results and instead focused on a deeper concern: a stubborn slowdown in China.
In its fiscal second quarter, Nike reported $12.4 billion in revenue and diluted earnings per share of $0.53, both of which topped Wall Street expectations. Still, the results masked deeper challenges.
Nike’s Greater China sales plunged 17% to about $1.42 billion, marking the sixth consecutive quarter of decline in the region and underscoring persistent demand weakness.
The company also warned that tariff headwinds and higher costs would continue to weigh on margins and earnings into the next quarter.
CEO Elliott Hill told analysts that Nike is “in the middle innings of our comeback,” highlighting progress in select businesses and regions. However, investors were unconvinced.
The stock fell more than 10% on Friday and remained under pressure into the start of the following week.
Nike’s current troubles reflect a constellation of strategic and market-position issues.
Beyond the slump in China, where the brand is reportedly struggling to lure back younger consumers, Nike is navigating supply chain cost pressures, shrinking margins, and intensifying competition from nimble rivals in key categories.
These operational headwinds added fuel to brand concerns, including recent criticism of the company’s handling of female athletes and diversity initiatives, lingering perceptions of declining product innovation, and an exodus of some high-profile endorsers seeking opportunities with competitors.
Nike’s comeback faces questions
InvestorsObserver reported in August that Nike was pivoting back toward wholesale, rekindling its partnership with Foot Locker after its earlier push to consolidate sales under a direct-to-consumer model.
The reversal underscored a hard lesson: brand power alone isn’t enough to dictate how consumers shop.
While Nike may have the swoosh, it underestimated the enduring appeal of brick-and-mortar retail, particularly for footwear, where shoppers still value in-store selection, fit, and experience.
By pulling back from wholesale partners, Nike effectively sidelined a key growth channel at a time when competitors were expanding their retail footprint.
While analysts aren’t completely writing off Nike’s recovery, skepticism remains. Piper Sandler recently maintained its “Overweight” rating on the stock but cut its price target to $75 from $84, reflecting a more cautious near-term outlook.
The revised target still implies roughly 30% upside, largely a function of the stock’s steep recent decline. However, that upside appears capped by ongoing weakness in China and margin pressure from tariffs and higher costs.