Nike (NYSE: $NKE) stock fell sharply, dropping about 10% in extended trading after the company released its fiscal second-quarter results. Investors were troubled not just by the numbers, but by signs of weakening demand in key markets and pressure on profits.
Nike reported total revenue of roughly $12.4 billion for the quarter, slightly above what analysts were expecting. However, the quarter revealed deeper issues under the surface.
Despite this modest top-line growth, net income fell sharply, and profit margins shrank compared with a year ago. Higher costs from tariffs and discounting older inventory contributed to this squeeze, leaving investors less confident about Nike’s near-term performance.
Greater China Troubles Continue
A major drag on Nike’s results was its Greater China market, where sales dropped about 17%, marking the sixth straight quarterly decline. This weakness in China overshadowed stronger performance in regions like North America and Europe.
Weak store traffic and inventory issues were cited as reasons for the China downturn, with Nike acknowledging the region “needs a reset” and plans to invest more in local stores and ecommerce to rebuild momentum.
Margin Pressure and Cost Headwinds
Nike’s gross margin fell by around three percentage points, reflecting rising prices from U.S. tariffs on imported goods and increased promotional spending to clear old stock. These cost pressures reduced profitability and weighed on investor sentiment.
Management said the company is in what it called the “middle innings” of its turnaround strategy, indicating the path to consistent recovery may be uneven and take more time.
Market Reaction and Outlook
The 10% drop in Nike’s share price shows how sensitive markets are to signs of slowing demand and shrinking profits, especially in a region as important as China. Even though overall revenue edged up, the lack of clear growth momentum in key markets left investors cautious.
Looking ahead, Nike expects revenue in its next quarter to be slightly lower as it navigates these challenges, further underscoring the uncertain near-term outlook.
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