Nike’s (NKE) stock is down 10% after the sneaker giant disclosed that its sales in China continue to weaken and that tariffs are impacting its profitability.
For this year’s third quarter, the Oregon-based company reported earnings per share (EPS) of $0.53 U.S., which beat the $0.38 U.S. expected among analysts.
Revenue in the quarter totaled $12.43 billion U.S., which topped the consensus forecast among analysts of $12.22 billion U.S.
Despite the top and bottom-line beats, Nike reported ongoing weakness in its China sales and the hit the athletic apparel maker is taking from higher tariffs, sending its stock lower.
Management highlighted that sales in North America rose 9% to $5.63 billion U.S. during Q3, helping to offset weakness in Asia.
However, revenue in Greater China dropped 17% to $1.42 billion U.S. Consumer demand in China has been weak since the Covid-19 pandemic ended.
Nike is about a year into chief executive officer (CEO) Elliott Hill’s turnaround strategy that focuses on regaining its growth and market share.
On an earnings call with analysts and media, Hill said Nike’s improvements in China are “not happening at the level or the pace we need to drive wider change.”
Looking ahead, Nike now expects revenue in the current quarter to fall by a low single digit percentage, with modest growth in North America.
Management said they also expect gross margins to fall 1.75 to 2.25 percentage points, including a 3.15 percentage point hit from tariffs.
Prior to today (Dec. 19), NKE stock had declined 11% this year to trade at $65.63 U.S. per share.
