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Nike shares continued to struggle on Friday as the Swoosh ran into some notable obstacles as it continued its comeback bid in the second quarter.
Overall, the company did better than analysts predicted, but the weight of what’s needed to turn around Converse and Greater China led to the stock to take a double-digit hit on Friday.
On the company’s second quarter earnings call on Thursday, Nike president and chief executive officer Elliott Hill told analysts that the company is “in the middle innings” of its comeback, adding that various areas of the business are in different phases of turnaround.
“Fiscal year ’26 continues to be a year of taking action to rightsize our classics business, return Nike digital to a premium experience, diversify our product portfolio, deepen our consumer connections, strengthen our partner relationships and realign our teams and leadership,” Hill said.
Net sales at the Beaverton, Ore.-based company tallied $12.43 billion, up 1 percent from $12.35 billion on a reported basis and flat on a currency-neutral basis. But net income fell 32 percent in the period to $792 million from $1.16 billion in the year-ago period. Diluted earnings per share dropped to 53 cents from 78 cents in Q2.
Williams Trading analyst Sam Poser wrote in a note on Friday that his “proprietary checks” with a number of retailers continue to indicate that Nike’s product offerings are improving, along with sell through rates.
“Some channels are improving better than others, and some new wholesale accounts are realizing better than expected sell through rates,” Poser wrote. “The modest revenue increase in third quarter 2026 is reflective of the reduction of fewer wholesale shipments to the off-price channel, and a deceleration of its own store sales growth as promotions sequentially decline on a year-over-year basis.”
So, there is still more work to be done. Here are the top two issues dragging Nike down right now, plus two bright spots for the Swoosh as its “Win Now” strategy takes hold.
A Long Road Ahead for China
In Greater China, Hill said on Thursday’s call that Nike has implemented its “Win Now” actions in the key cities of Beijing and Shanghai, leading with more storytelling of its product innovations, editing its assortments and elevating the presentation of those assortments in targeted doors.
“The next step is to further adapt our approach to fit China’s unique monobrand footprint and digital-first marketplace,” Hill told analysts. “The reset requires a fresh way of thinking from our Nike teammates and our Nike store partners, and it will take time.”
BNP Paribas Equity Research senior analyst Laurent Vasilescu wrote in a note on Friday that China was down 16 percent in Q2 with a “significant deceleration” versus last quarter on a multi-year stack basis. Margins collapsed 850 basis points, the analyst noted.
“We warned that China was … structurally different with both domestic and international competition,” Vasilescu wrote. “Nike still has over 5,000 mono-branded stores and we are curious to know where that number needs to go. With third quarter revenues guided to be down similarly to Q2, China could be down well into fiscal year 2027 and beyond. All indications from Nike is that this is going to take time … time that investors are losing faith in with the stock down double digits.”
Hill further added that immediate actions the company has taken in the region include cleaning up the marketplace of aged product, getting back to the basics of retail with consumer right assortments, better storytelling and elevated visual presentation.
“We’ve diagnosed the problem, and we will return Nike to a beloved premium and innovative brand in China,” Hill said.
Converse Needs Help
Details on the company’s efforts to overhaul Converse were not disclosed on Nike’s Q2 earnings call, but management made it a point to disclose that it is “resetting the marketplace with new leadership – referring to 21-year Nike veteran Aaron Cain taking on the Converse chief executive officer role in July, succeeding Jared Carver.
Nike is expecting Converse to experience continued headwinds for the balance of the fiscal year as revenues for the brand were $300 million in Q2, down 30 percent on a reported basis, due to declines across all territories.
“Significant ongoing promotional activity, and some inventory write-downs will likely be needed to reposition Converse and Greater China,” Poser wrote in his note on Friday.
North American Sales Are Up
Hill told analysts on Thursday’s call that North America is “leading the way” for Nike right now.
“As our largest business, that’s where much of our focus has been,” Hill said. “With North America, we’re working with the most diverse wholesale landscape, which gives us several strategic partners to segment and differentiate our multi-brand, multisport and multi-price point portfolio. The team has done an excellent job of reconnecting with partners and getting sharper on the consumers we serve and those that we seek to serve.”
This quarter, Hill noted that this approach led to a 9 percent sales increase in North America, with an over 20 percent rise in its wholesale business with “meaningful growth” coming from existing partners. The CEO also highlighted the company’s North American marketing team for “finding the right balance” of inspiration through big team moments.
“North America is driving a healthy, repeatable offense and showing us what winning looks like,” Hill added. “It’s a great signal for our future success in other geographies.”
Running Is Sprinting Ahead
Over the last 90 days, the running category is “leading the effort,” at the Nike brand, with sales in the category up over 20 percent in the quarter and up double digits in every channel, including Nike Direct.
The CEO noted that the category is “not just about footwear,” it’s about workout clothes, too. Hill said the company has “some really strong apparel” coming to the Nike Running offering soon, but also called out some more launches in the space coming up.
“Our teams are determined to deliver a consistent product innovation pipeline,” Hill said on the call. “In January, Nike Running will build off of the strong start of our new stability shoe, the Structure 26, with the introduction of the Structure Plus. Also in January, we’ll debut Nike Mind, a new footwear platform that will help athletes prepare for performance and competition, which we see as a new dimension to the Nike Training’s offense.”
