Nike's Stock Declines Due to Ongoing Margin Pressures and Continued Decline in China

Nike shares declined by 10% following the announcement of Q2 fiscal 2026 earnings, which revealed a 32% decrease in net income.

Nike's challenging ascent to the pinnacle encountered another obstacle this week as the sportswear behemoth disclosed a new array of financial difficulties. Despite a slight sales increase to $12.4 billion USD—up 1% year-on-year—the company's stock fell 10% during a disheartening Q2 earnings call on December 18, 2025. Despite robust top-line results, the persistent "profitability bleed" has prompted investors to scrutinise the pace of the brand's recovery.

The primary impediment continues to be Greater China, where sales decreased by 17%, signifying the sixth successive quarter of contraction in the area. The structural vulnerability, along with a 32% decline in net income, underscores a challenging transitional phase for the organisation. CFO Matthew Friend disclosed that a new set of tariffs on Southeast Asian manufacturing has emerged as a significant adversary, resulting in a projected loss of $1.5 billion USD for the company this year. This headwind resulted in a significant 300-basis-point reduction in gross margins, with additional losses anticipated in the forthcoming months.

CEO Elliott Hill remains resolute, characterising the company as being in the "middle innings" of a strategic realignment. The "Sport Offence" recovery strategy aims to revitalise essential categories such as running and reinforce relationships with wholesale partners to reclaim market share from nimble competitors like On and Hoka. Nonetheless, the return to third-party retail—although boosting volume—is already adversely affecting profits due to heightened discounting. Nike's journey towards achieving a "virtuous cycle" of full-price sales and brand vitality is demonstrating to be a prolonged endeavour rather than a swift undertaking.