NEW YORK, NY — Shares of Nike Inc. (NKE) tumbled more than 10% in early trading on Friday, December 19, 2025, after the sportswear giant issued a sobering outlook that overshadowed a quarterly earnings beat. Despite showing resilience in North America, the company warned of a looming revenue decline fueled by persistent economic headwinds in China and a startling collapse in sales for its Converse subsidiary.
The world’s largest footwear and apparel brand now expects revenue to decline in the “low-single digits” for the fiscal third quarter, which began on December 1. The forecast represents a jarring pivot for investors who had hoped the company’s recent “Win Now” strategy was gaining more substantial traction globally.
The “China Conundrum”: A Growth Engine Stalls
For years, Greater China served as Nike’s primary engine for growth and high-margin expansion. However, the latest fiscal second-quarter results (ended November 30, 2025) revealed a 17% decline in revenue within the region, falling to $1.42 billion.
The slump in China is attributed to several critical factors:
- Intense Local Competition: Domestic Chinese brands like Anta and Li-Ning continue to steal market share by offering culturally resonant designs and competitive pricing
- Digital Disconnect: Nike Brand Digital sales in China crashed by 36%, a devastating blow in a market that is increasingly digital-first.
- Consumer Fatigue: Declining store traffic in key metropolitan areas suggests that Chinese consumers are pulling back on discretionary spending amidst a broader macroeconomic slowdown
- CEO Elliott Hill, who took the helm in October to spearhead a turnaround, was candid during the post-earnings call. “It is clear we need to reset our approach to the China marketplace,” Hill admitted, describing the current situation as being in the “middle innings” of a multi-year recovery
Converse: A Brand in Crisis?
While the core Nike brand saw modest gains in North America, the Converse subsidiary told a much bleaker story. Revenue for the brand plunged 30% to just $300 million in the latest quarter.
Converse has historically relied heavily on its iconic Chuck Taylor silhouette. However, analysts warn that the brand has struggled to innovate beyond its classic lifestyle roots, failing to capture the interest of a younger generation increasingly focused on performance-oriented and “chunky” sneaker trends. The decline was widespread, with revenue falling across all geographic territories.
Financial Highlights and Tariff Headwinds
Despite the bleak outlook, Nike’s headline numbers for the second quarter actually outperformed Wall Street’s expectations, thanks largely to a 9% revenue jump in North America and a strong wholesale performance (up 8%).
Q2 2026 Fiscal Snapshot
- Total Revenue: $12.4 billion (up 1% reported, beating estimates of $12.2 billion)
- Earnings Per Share (EPS): $0.53 (beating estimates of $0.37)
- Gross Margin: 40.6% (down 300 basis points)
- Net Income: $0.8 billion (down 32% year-over-year)..
The sharp decline in gross margin was primarily driven by increased tariffs, which management estimates will create a $1.5 billion annualized headwind. Without these geopolitical cost pressures, Nike noted that its margins would have likely remained positive for the quarter.
The “Longer Road” to Recovery
Nike’s management is currently navigating a “marketplace reset,” moving away from the previous administration’s heavy reliance on direct-to-consumer (DTC) sales and rebuilding relationships with wholesale partners like Foot Locker and JD Sports.
CFO Matthew Friend cautioned that changing the trajectory of the company would “take time,” particularly as they work to clear out dated inventory through discounts that further squeeze margins.
The market reaction on Friday reflects a growing skepticism among investors regarding the speed of this comeback. While North America remains a stronghold, the “stubborn weakness” in China suggests that Nike’s global dominance is being tested like never before.