Key Takeaways:
(Bloomberg) -- Nike Inc.’s China division sales have collapsed 28% from five-year-ago levels, pushing the company to cut 1,400 jobs as it forecasts a further 20% revenue decline in the region for the quarter ending May 31.
“There is no China engine anymore to drive the growth,” Laurent Vasilescu, an analyst at BNP Paribas, said.
The Beaverton, Oregon-based company’s revenue in China for the past three quarters was sharply lower than the same period five years ago. For its fiscal 2026 third quarter, overall revenue was flat year-over-year at $11.3 billion, but China sales slipped 11% and digital sales fell 9%. The sustained pressure contributed to Nike’s stock closing at $44.78 on April 23, its weakest level in nearly six years and approximately 70% below its 2021 high.
The decline reflects a fundamental challenge for U.S. brands in an increasingly nationalistic Chinese market. Nike is losing ground to domestic competitors like Anta and Li-Ning, which are rapidly closing the technology and branding gap while leveraging a “guochao” cultural trend that favors local products.
Chinese brands are proving to be formidable competitors. Anta has developed its own nitrogen-infused foam cushioning to rival Nike’s technology and signed NBA star Kyrie Irving. Local reviewers now rate Li-Ning’s top running shoes on par with Nike’s premium Vaporfly models.
This competitive pressure comes as Chinese consumer tastes evolve. A decades-long fascination with basketball, a traditional Nike stronghold, is giving way to interest in other outdoor activities like hiking and trail running. A recent market report shows the toddler hiking shoe segment in China is expanding by 10-14% annually, fueled by a 35% rise in family camping and hiking trips since 2022, a market where domestic brands are dominant.
Nike has been slow to adapt, according to former employees. The company established a flagship store on Douyin, China’s version of TikTok, only in 2024, years after its local rivals. Controversies, including a 2021 boycott over its stance on Xinjiang and a 2024 ad perceived as insulting to Chinese athletes, have further damaged the brand.
Under CEO Elliott Hill, who took over in October 2024, Nike is implementing a “China-for-China” strategy to regain its footing. This includes establishing a sports research lab in Shanghai and replacing its longtime China leadership.
The turnaround effort faces significant headwinds as the company works to clear $7.5 billion in inventory. The recent guidance for a 2% to 4% sales decline for the current quarter shows the depth of the challenge. Investors will watch for tangible results from the new strategy by late 2026, which hinges on new product launches and repairing retailer relationships.
This article is for informational purposes only and does not constitute investment advice.
