``` It will take Nike several more seasons to emerge from the downturn in the Chinese market. ```
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Nike's China problem remains unresolved this season.
On June 30th, Nike disclosed its fiscal year 2026 fourth-quarter and full-year results (ending May 31, 2026).
In the fourth quarter, the company’s revenue was $11 billion, down 1% year-on-year, and down 4% on a currency-neutral basis; full-year revenue was $46.4 billion, basically flat on a reported basis and down 2% on a currency-neutral basis.
On the surface, Nike's profits recovered significantly: fourth-quarter net profit was $1.1 billion, a year-on-year increase of 407%, and diluted earnings per share were $0.72. But this performance was largely due to a one-time benefit from tariff refunds.
According to the financial report, the expected IEEPA tariff recoveries brought $986 million in income, contributing about 900 basis points to the fourth-quarter gross margin, and $0.52 to EPS. Excluding this factor, Nike's fourth-quarter EPS was only $0.20.
What continues to weigh on market sentiment is that Nike China has yet to see a turnaround.
In the fourth quarter, Nike's Greater China revenue was $1.297 billion, down 12% year-on-year and down 17% on a currency-neutral basis, with single-quarter revenue falling to the lowest point in nearly two fiscal years.
For the full year, Greater China revenue was $5.847 billion, down 11% year-on-year and down 13% on a currency-neutral basis, continuing to weaken on top of the previous year's decline.
The pressure in Greater China is now more than just a regional data point in the financial report; it has become the hardest part to fix in Nike’s global reset process.
At the earnings call, CEO Elliott Hill called Greater China a "key long-term growth market" for Nike, and said the company is executing a "comprehensive reset" in China: returning to sports and innovation, localizing product creation, building a more regionalized offense system, rethinking market operations, evaluating new growth paths with partners, making the brand more premium and closer to local culture, and operating at the speed of Chinese consumers.
Behind this description are longstanding issues exposed by Nike China over the past two years: lack of product popularity, higher online discounts, pressured inventory and channel health, and intensified competition from domestic sports brands.
Nike has seen some local improvements.
CFO Matthew Friend said at the earnings call that Greater China implemented multiple adjustments during the quarter: sell-through rates improved quarter-over-quarter, and average retail discounts fell; after two quarters of aggressive promotion cuts, the full-price realization rate of digital channels is recovering. Meanwhile, both the inventory value and number of inventory units in Greater China dropped by double digits.
But these improvements are not enough to offset the overall decline.
In the fourth quarter, Greater China Nike Direct dropped 14%, with Nike Digital down 25% and Nike-owned stores down 9%. Wholesale channels declined 19%; EBIT (reported, not excluding one-offs) fell 20%.
The company also expects Greater China’s revenue trend in the short term to be basically in line with recent performance.
This means that for some time to come, Nike China's recovery remains at the stage of clearing inventory, compressing discounts, and restructuring key stores, and has not yet entered a period of stable recovery and growth.
Anxiety over channels in the China market has already spilled over into the capital market ahead of the earnings report.
In late June, there were market rumors that Nike might cancel online first-level distributor authorization in Mainland China from January 2027. However, this rumor was quickly clarified by Nike's main distributor in China, Topsports, through an announcement, and Nike also denied it during the earnings call.
The reason the rumor drew so much attention is because it hit a sensitive spot in Nike China's channel structure.
In the past few years, Nike emphasized DTC and digital direct sales, but as direct sales came under pressure and wholesale partners regained importance, the company has been restoring relationships with distributors and retailers globally.
In fiscal 2026 fourth quarter, Nike's global wholesale revenue was $6.6 billion, up 4% year-on-year; Nike Direct revenue was $4.1 billion, down 7% year-on-year, and Nike Brand Digital down 12%.
After Elliott Hill’s return, he proposed "Win Now" and "Sport Offense," focused on refocusing on sports, product innovation, wholesale partners and key markets.
But at the latest earnings call, he admitted the overall results "have not reached the desired level," and there are still challenges in sell-through for Nike Sportswear and Jordan Streetwear, affecting current discounts and future orders.
This also epitomizes Nike China's problems. Chinese consumers have not stopped buying sports shoes and apparel, but there are more options, a faster pace, and greater price sensitivity.
Domestic brands continue to increase their presence in running, outdoor, basketball and training segments, while e-commerce platforms and content channels have further accelerated price comparisons and the spread of new products.
Nike’s previous model of relying on global blockbusters, classic shoe models and brand halo effects for premium pricing has been especially weakened in the Chinese market.
The capital markets are not lenient about this. After the earnings report, Nike’s stock price dropped about 4% after hours, and is down around 35% so far this year; investors are still waiting for more concrete results from Hill’s two-year recovery plan.
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