NIKE, Inc. Class B(NKE.US) "Facing Consumers" Strategy Stalled: Q2 Net Profit Plummets 32%! Greater China region slows down, tariffs hit gross profit, stock plunges 10% after hours.

NIKE, Inc. Class B (NKE.US) released its performance report for the second quarter of the 2026 fiscal year after hours on Thursday. Despite both revenue and profits exceeding market expectations, net profits declined year-on-year due to a decrease in profit margins and continued pressure on direct sales business. The report shows that the company, headquartered in Beaverton, Oregon, saw a 32% year-on-year decrease in net profits, from $1.16 billion in the same period last year to $0.792 billion; diluted earnings per share also dropped from 78 cents to 53 cents, compared to market expectations of 38 cents. Net sales for the period were $12.43 billion, a 1% increase from the same period last year's $12.35 billion, slightly exceeding market expectations of $12.22 billion; when measured at fixed exchange rates, it remained flat compared to the previous year. By business segment, NIKE, Inc. Class B stated that NIKE, Inc. Class B brand's revenue for the second quarter was $12.1 billion, a 1% increase year-on-year. The growth was mainly driven by performance in the North American market, but was partially offset by declines in the Greater China and Asia Pacific Latin America (APLA) regions. For NIKE, Inc. Class B, challenges in the Chinese market remain significant, with revenue declining by 17% year-on-year to $1.7 billion in the Greater China region, and pre-tax profits plummeting by 49%. Revenue from the NIKE, Inc. Class B direct sales business was $4.6 billion, an 8% decrease year-on-year, with digital business revenue for the NIKE, Inc. Class B brand falling by 14% and sales from owned stores declining by 3%. Looking ahead, inventory levels have improved, decreasing by 3% to $7.7 billion. Cash and short-term investments at the end of the quarter were $8.3 billion, a decrease of $1.4 billion, as dividends, share repurchases, bond repayments, and capital expenditures exceeded operating cash flow. The company did not provide guidance for the third quarter or full year performance. Following setbacks in its DTC strategy, can NIKE, Inc. Class B regain market trust by embracing the wholesale channel? In recent years, NIKE, Inc. Class B has heavily promoted its "Direct-to-Consumer" (DTC) strategy to reduce reliance on traditional wholesalers, but has faced a series of difficulties in practice, leading the company to reevaluate and restore its relationship with wholesale partners. Currently, while NIKE, Inc. Class B is focusing further on key sports programs and core cities, and working to repair relationships with retail partners, investors still hope to see more progress in other "problem areas." Bloomberg Industry Research senior analyst Poonam Goyal said, "Disappointing performance in the direct-to-consumer business and the Chinese market, we need to hear more about when things will be back on track. Apart from that, overall performance is solid." The company has also prioritized the reset of Converse's market and brand. Converse has long relied on the Chuck Taylor athletic shoe to drive sales but has struggled to ignite consumer enthusiasm in other product categories. In response to this, NIKE, Inc. Class B CEO Elliott Hill stated, "NIKE, Inc. Class B is in the middle of a counteroffensive," noting that the company still has work to do in executing the "Win Now" strategy - including team realignment and repairing retail relationships. Hill said, "We are making progress in priority areas first, and we are confident in the initiatives to drive long-term brand growth and profitability. The 2026 fiscal year will continue to be a year of action with 'Win Now,' including team realignment, strengthening partner relations, rebalancing product portfolios, and winning on the ground. We have found our rhythm in a new sports offense and are ready to push forward in athlete-centered innovation at a higher and more integrated level." NIKE, Inc. Class B Executive Vice President and CFO Matthew Friend added that the company's performance in the second quarter "demonstrated the resilience of the product portfolio," achieving a moderate growth in reported revenue despite unfavorable factors. "We are making necessary adjustments to prepare the product portfolio for a full recovery and making real-time decisions to serve the long-term health of the brand." In 2024, NIKE, Inc. Class B's stock price was the second worst performer among the 30 constituents of the Dow Jones Industrial Average, with a 30% decline for the year. It closed at $53.27 on April 8, corresponding to a market capitalization of $82 billion, significantly down from its peak of $281 billion. NIKE, Inc. Class B's stock price closed at $65.63 on Thursday, with a cumulative loss of 13.1% since the beginning of 2025, while the S&P 500 index recorded a significant increase of 15.4% during the same period. After the latest quarterly earnings report, the stock plunged more than 10% in after-hours trading, falling to $58.60.