$NKE ( ▼ 10.56% ) is getting hammered, down around 10% in premarket trading Friday after the sneaker giant delivered softer-than-expected guidance for its upcoming quarter, overshadowing a clean beat on Q2 earnings and revenue.
Beats the quarter, whiffs the outlook
Nike posted Q2 revenue of $12.4 billion, up 1% year over year and ahead of the $12.2 billion consensus. Adjusted EPS came in at $0.53, comfortably beating estimates of $0.38, helped by a 9% sales increase in North America. That strength, however, wasn’t enough to mask growing pressure elsewhere.
Looking ahead to Q3, management said revenue is expected to be down low single digits, with only modest growth in North America. China remains a major drag, and CFO Matthew Friend warned that gross margin will fall by 175 to 225 basis points due largely to higher costs tied to new tariffs.
China, Converse, and DTC trouble
China continues to be the biggest sore spot. Regional sales fell 17% year over year, with CEO Elliott Hill saying the recovery is not happening at the speed Nike needs to drive a broader turnaround. Hill added the company is still in the middle innings of its comeback effort.
Nike’s direct-to-consumer push is also wobbling. NIKE Brand Digital sales dropped 14% in Q2, while the Converse brand saw sales plunge 30%, following a 27% decline in the prior quarter. After years of leaning into DTC as a growth engine, investors are questioning whether that strategy can deliver in a tougher global environment.
With Friday’s selloff, Nike shares are now down roughly 23% year to date, as weak China demand, margin pressure, and tariff headwinds continue to weigh on the turnaround story.