Nike Shares Tumble on Persistent Weakness in China

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Nike's latest quarterly results have revealed a deeper crisis than anticipated, sending its stock plummeting by more than 10% in Monday's trading session. The catalyst was a disappointing earnings report that highlighted one core vulnerability: a dramatic slowdown in the critical Chinese market. This has prompted a wave of analyst downgrades and reduced price targets for the sportswear giant.

The company's profitability metrics came under significant pressure. Its gross margin contracted by 300 basis points to 40.6%, attributed to increased discounting and higher product costs, including tariff impacts in North America. Earnings per share fell 32% to $0.53. While this figure surpassed some expectations, it clearly indicates eroding profitability.

A strategic pivot is also facing headwinds. Revenue from Nike's direct-to-consumer channels declined by 8%, casting doubt on the company's shift away from wholesale partners under the leadership of CEO Elliott Hill. This costly strategic correction suggests the move may have been overly aggressive.

China's Downturn Extends to a Sixth Quarter

The most alarming data point centers on Greater China, once Nike's premier growth engine. Revenue in the region plunged 17% to $1.42 billion. This marks the sixth consecutive quarter of decline, solidifying a troubling trend of sustained contraction that is now acting as a major drag on overall performance.

Overall revenue growth stagnated, increasing a mere 1% to $12.4 billion. This tepid result falls far short of the momentum many analysts expected from the company's "Win Now" strategy.

Market Experts Express Doubt and Adjust Targets

In response to the prolonged challenges, analysts have moved swiftly to reassess their outlook. Daiwa Securities slashed its price target on Nike shares from $75 to $61, citing a longer-than-expected recovery timeline and the ongoing need to reduce inventory levels. Similarly, Piper Sandler cautioned that the company's repositioning efforts would require "more time."

With a trailing price-to-earnings ratio of approximately 30, the stock's valuation appears difficult to justify alongside a 7.1% revenue decline over the past twelve months.

Technical and Operational Challenges Ahead

From a technical analysis perspective, the stock is at a critical juncture. Market observers note that the share price must hold support at the $57 level; a breach could trigger a slide toward the 52-week low of $52. In the interim, macroeconomic data from China and updates on inventory reduction efforts will likely be the primary drivers of price action. The pressure is now squarely on management to demonstrate tangible progress before the next quarterly report.