Nike sales fall during key holiday quarter, driven by 17% plunge in China

Nike beat Wall Street’s expectations for its key holiday quarter but sales were down 9% across the business, driven by weakness in China.

During the quarter, sales fell 17% in the key region to $1.73 billion, falling short of expectations of $1.84 billion, according to StreetAccount. 

The company shared few details about its current outlook in its fiscal third quarter earnings release and didn’t publish any guidance, saying only that its outlook for the second half of fiscal 2025 is “consistent” with what it communicated in December when it reported fiscal second-quarter earnings.

“The operating environment is dynamic, but what matters most for NIKE is serving athletes with new product innovation and re-igniting brand momentum through sport,” finance chief Matt Friend said in a statement.

Here’s how the company performed during the quarter, compared with estimates from analysts polled by LSEG:

• Earnings per share: 54 cents vs. 29 cents estimated
• Revenue: $11.27 billion vs. $11.01 billion estimated

The company’s reported net income for the three-month period that ended Feb. 28 was $794 million, or 54 cents per share, compared with $1.17 billion, or 77 cents per share, a year earlier.

Sales dropped to $11.27 billion, down about 9% from $12.4 billion a year earlier. 

While Nike delivered a strong earnings beat, expectations were low headed into the release and profits fell 32% from the year-ago period.

During the quarter, Nike’s gross margin fell by 3.3 percentage points to 41.5%, lower than expectations of 41.8%, according to StreetAccount. That’s largely because of the costs associated with Nike’s efforts to clear out old inventory in favor of new, innovative styles. In a press release, the company attributed its drop in gross margin to “higher discounts, higher inventory obsolescence reserves, higher product costs and changes in channel mix.”

Thursday’s release comes about five months into Elliott Hill’s tenure as CEO and his efforts to turn around the business and get it back to growth. He has focused on winning back wholesale partners, reigniting innovation and wooing back athletes that have fled to new competitors, but the work has not yet yielded results.

During the quarter, sales on Nike’s direct channels dropped 12% to $4.7 billion. Wholesale revenue fell 7% to $6.2 billion.

Plus, since Hill took over, the company is now contending with a new set of dynamics that could make its comeback even harder to execute.

In the three months since Nike last reported earnings, President Donald Trump has put a new 20% tariff on goods imported from China, consumer sentiment has fallen, and retail sales in both January and February were weaker than expected.

Out of the hundreds of suppliers and manufacturers that Nike works with, about 24% of them are located in China, according to a manufacturing disclosure published in January. If the retailer doesn’t raise prices to offset tariffs and can’t push the cost entirely on to suppliers, Nike’s margins are expected to take a hit from the new duties.

Further, when consumers aren’t feeling confident and cutting back on spending, discretionary products like new clothes and shoes are one of the first things they cut out in favor of necessities. Over the last few years, the overall sneaker and apparel markets have been slow because consumers have cut back on clothes and shoes. But up until recently, strong companies were still performing well and taking market share from weaker competitors.

However, that trend began to shift over the last few weeks when even the strongest of companies started to sound the alarm about soft consumer spending when they reported first-quarter earnings, raising questions about the health of the economy.

During the quarter, sales in North America — Nike’s largest market — fell 4% to $4.86 billion. Still, revenue in the region came in better than the $4.53 billion analysts had expected, according to StreetAccount.

Nike is widely expected to reclaim the market share it lost and reset its business, and some insiders say the company’s problems have been overblown. Even so, the tariffs and economic fears could mean that the retailer’s turnaround could take longer, and be more difficult, than expected.

Nike has already made strides in winning back market share and growing its female customer base, a key component to boosting revenue and apparel sales. Last month, it announced it was teaming up with Kim Kardashian’s intimates brand Skims to create a new product line dubbed NikeSKIMS that will include apparel, footwear and accessories. The buzzy partnership is expected to give Nike improved inroads with women and allow it to better compete with Lululemon, Alo Yoga and Vuori, which cater more to women than Nike currently does.

Further, Nike debuted a new ad campaign geared toward female athletes during the Super Bowl, its first big game advertisement in decades. The campaign showed that reaching female athletes and capturing the buzz around women’s sports will be a center point of Hill’s strategy.

When Nike hosts its earnings call at 5 p.m. ET, analysts and investors will want to know how new product launches are faring as the company restarts its innovation engine. Some analysts say clues into the product pipeline will be the most important detail to listen for during the call because Nike’s ability to innovate and put out the best products in the industry is what made it the market leader in athletic apparel and shoes.

If it can show positive signs from new product launches, the rest of its headwinds might just be drowned out as noise.

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