Nike Plunges 11% As Tariffs, China Woes Cloud Outlook: Q3 Margins To Contract Amid Warning Of 'Longer Road' To Recovery
Nike Inc. (NYSE:NKE) shares plummeted nearly 11% in after-hours trading on Thursday, as management issued a cautious outlook defined by shrinking margins and deepening struggles in China during the second-quarter earnings call.
Check out NKE’s stock price here.
Tariffs And Guidance Weigh On Margins
Despite reporting revenue of $12.43 billion—topping analyst estimates—the sportswear giant warned that its recovery remains fragile, with executives emphasizing that the “comeback continues to move at different speeds”.
A disappointing forecast for the third quarter triggered the sharp sell-off. CFO Matt Friend guided for third quarter revenue to decline in the low single digits and for gross margins to contract by approximately 175 to 225 basis points.
The primary culprit is a steep rise in product costs due to reciprocal tariffs, which management estimates will create a $1.5 billion annualized headwind.
Friend noted that without the projected 315-basis-point hit from these tariffs, gross margins would likely be positive in the third quarter, underscoring the severity of the macroeconomic pressure. “It will take time for the actions we have put into place to change the trajectory,” Friend cautioned.
See Also: Nike’s ‘Win Now’ Strategy Shows Early Wins, But Q2 Earnings Expected To Slip
China Woes Deepen
Compounding the negative sentiment was a significant deterioration in Greater China, which has traditionally been a key growth engine. Revenue in the region plunged 16% in the second quarter, with digital sales crashing 36% as the company battled declining store traffic and a promotional marketplace.
CEO Elliott Hill was blunt about the timeline for recovery, stating the region faces a “longer road to a healthier business.”
While the company is resetting its strategy in key cities like Beijing and Shanghai, Hill admitted the turnaround is “not happening at the level or pace we need.”
‘Middle Innings’ Of Recovery
Despite the gloom, there were bright spots. North America revenue jumped 9%, fueled by a 24% surge in wholesale, proving that Nike’s “Win Now” strategy is gaining traction domestically.
However, Hill tempered expectations, describing the company as only being in the “middle innings” of its comeback. “Greatness isn’t promised, it’s earned,” Hill told investors, “And we’re ready to earn it, again and again.”
Nike Underperforms In 2025
Shares of NKE ended 0.091% lower at $65.63 apiece on Thursday and plummeted 10.76% in after-hours. The stock was down 13.27% year-to-date and 14.66% over the year. However, it was up 10.28% over the last six months.
It maintains a weaker price trend over the medium and long term but a strong trend in the short term, with a poor quality ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings, are available here.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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