Nike's challenges in China persist, with no turnaround in sight this quarter. On June 30th, Nike reported its financial results for Q4 and the full fiscal year 2026 (ending May 31, 2026). For the fourth quarter, the company's revenue reached $11 billion, a 1% year-over-year decrease, or a 4% decline on a currency-neutral basis. Full-year revenue was $46.4 billion, essentially flat on a reported basis but down 2% on a currency-neutral basis. On the surface, Nike's profitability showed significant improvement, with Q4 net income hitting $1.1 billion, a surge of 407% year-over-year, and diluted earnings per share (EPS) at $0.72. However, this performance was largely driven by a one-time gain from tariff recoveries. The financial report indicated that the IEEPA tariff recovery contributed $986 million in benefits, adding approximately 900 basis points to the Q4 gross margin and $0.52 to EPS. Excluding this factor, Nike's Q4 EPS would have been only $0.20.

What continues to unsettle the market is the ongoing weakness in Nike's Greater China performance. In the fourth quarter, revenue from the Greater China region was $1.297 billion, down 12% year-over-year, or a 17% decline on a currency-neutral basis, marking the lowest quarterly revenue in nearly two fiscal years. For the full year, Greater China revenue was $5.847 billion, down 11% year-over-year, or a 13% decrease on a currency-neutral basis, continuing its decline from the previous fiscal year. The pressure in Greater China is no longer just a regional data point in the earnings report; it has become the most challenging piece to fix in Nike's global reset.

Focus on the Greater China Market

During the earnings call, CEO Elliott Hill referred to Greater China as a "critical long-term growth market" for Nike and stated the company is executing a "comprehensive reset" in China. This involves refocusing on sport and innovation, creating more localized products, building an offensive system closer to the regional market, and rethinking market operations. The company is also evaluating new growth pathways with partners to elevate the brand, make it more culturally relevant, and operate at the speed of Chinese consumers. This rhetoric addresses the persistent issues that have plagued Nike China over the past two years: lackluster product heat, high online discounts, pressure on inventory and channel health, and intensified competition from local sportswear brands.

Nike has noted some isolated improvements. CFO Matthew Friend mentioned on the call that the Greater China region implemented several adjustments in the quarter: sell-through rates improved sequentially, average retail discounts decreased, and the full-price realization rate in digital channels is recovering after more aggressive promotion reductions over the past two quarters. Furthermore, both inventory value and unit count in Greater China saw double-digit declines. However, these improvements are insufficient to offset the overall decline.

Challenges in Key Metrics

In Q4, Nike Direct in Greater China fell 14%, with Nike Digital down 25% and Nike-owned stores down 9%. The wholesale channel declined by 19%, and reported EBIT (before one-time items) dropped 20%. The company also expects the near-term revenue trend in Greater China to remain largely consistent with recent performance. This suggests that for the foreseeable future, Nike's recovery in China will remain in a phase of clearing inventory, reducing discounts, and restructuring key stores, not yet entering a stable growth recovery cycle.

Anxiety about the Chinese market's channels has already spilled over into the capital markets ahead of the earnings report. In late June, market rumors suggested Nike might cancel its primary online distributor authorizations in mainland China starting January 2027. However, this was quickly clarified by a statement from Nike's major Chinese distributor, Topsports, and denied by Nike during the earnings call. The rumor gained significant attention because it touched a sensitive nerve in Nike's Chinese channel structure. In recent years, Nike had emphasized DTC and digital direct sales, but as direct sales faced pressure and wholesale partners regained importance, the company has been repairing its relationships with distributors and retailers globally.

Global Strategy and Local Realities

In Q4 FY2026, Nike's global wholesale revenue was $6.6 billion, up 4% year-over-year, while Nike Direct revenue was $4.1 billion, down 7%, with Nike Brand Digital falling 12%. Since his return, CEO Elliott Hill has promoted "Win Now" and "Sport Offense," focusing on re-centering sport, product innovation, wholesale partners, and key markets. However, in the latest earnings call, he admitted the company's overall results "are not yet where they need to be," with sell-through challenges in Nike Sportswear and Jordan Streetwear affecting current discounts and future orders. This mirrors the broader problem in China.

Chinese consumers have not stopped buying athletic footwear and apparel; they simply have more choices, faster trends, and greater price sensitivity. Local brands are continuously investing in specific sport scenarios like running, outdoor, basketball, and training, while e-commerce platforms and content channels further amplify price comparison and new product dissemination speed. The model that relied on global blockbusters, classic sneakers, and brand prestige to command a premium has been significantly weakened in the Chinese market.

The capital market has shown little tolerance. Following the earnings release, Nike's stock price fell approximately 4% in after-hours trading and is down about 35% year-to-date. Investors are still waiting for more definitive results from Hill's recovery plan, which has been in place for nearly two years.