Beaverton, Oregon — Nike's stock plunged more than 10% in premarket trading Friday as investor concerns over a severe sales drop in China and the mounting impact of tariffs eclipsed a better-than-expected quarterly earnings report. While the sportswear giant topped estimates with earnings of 53 cents per share and revenue of $12.43 billion, a 17% decline in Greater China sales highlighted the fragility of its ongoing turnaround.

The stark regional contrast defined the quarter: North America sales grew 9% to $5.63 billion, demonstrating resilience, but the sharp contraction in China—a market CEO Elliott Hill called one of Nike's "most powerful long-term opportunities"—raised doubts about the pace of recovery. The company's net income fell 32% to $792 million, pressured by higher tariffs, which also contributed to a 3-percentage-point drop in gross margins.

A Turnaround in the "Middle Inning" Amid Persistent Headwinds

Nike is more than a year into Hill's strategic overhaul, focused on clearing inventory, investing in wholesale relationships, and diversifying its product portfolio. Hill described the effort as being in the "middle inning of our comeback." However, progress in China is "not happening at the level or the pace we need," he admitted, with the company forecasting a low single-digit revenue decline for the current quarter and continued gross margin pressure from tariffs.

The challenges extend beyond China. The Converse brand saw sales plummet 30%, and Nike's direct-to-consumer sales fell 8% as the company rebalances its distribution strategy. These figures underscore the complexity of the high-stakes turnaround Hill is attempting to engineer in a competitive global athletic wear ecosystem.

Strategic Shifts and Cautious Outlook

In response, Nike is accelerating internal changes, recently streamlining leadership to "remove layers" under its "Win Now" strategy. The company is also pinning hopes on new initiatives like the upcoming Nike Mind footwear platform and highlighting digital successes, such as a record Black Friday on Nike.com.

Despite these efforts, analyst sentiment remains cautious. Citi noted that the prolonged weakness in China complicates the timeline for a full recovery. For investors, the steep sell-off reflects a judgment that near-term headwinds—geopolitical tensions, tariff costs, and fierce local competition—may outweigh the positive strides in North America and the promise of Hill's long-term strategic repositioning. The path forward requires Nike to successfully execute a delicate balancing act across divergent regional markets while managing significant external cost pressures.