To get out of the trough in the Chinese market, Nike still needs several seasons.

Nike's China problem remains unsolved this quarter.

On June 30, Nike reported its fourth-quarter and full-year results for fiscal 2026 (ending May 31, 2026).

In the fourth fiscal quarter, the company's revenue was $11 billion, down 1% year-over-year, or down 4% on a currency-neutral basis; full-year revenue was $46.4 billion, essentially flat on a reported basis and down 2% on a currency-neutral basis.

On the surface, Nike's profit side saw a significant recovery, with fourth-quarter net profit of $1.1 billion, up 407% year-over-year, and diluted earnings per share of $0.72, but this performance largely came from a one-time benefit of tariff refunds.

The financial report shows that the expected recovery of IEEPA tariffs brought a gain of $986 million, contributing approximately 900 basis points to the fourth-quarter gross margin and $0.52 to EPS. Excluding this factor, Nike's fourth-quarter EPS was only $0.20.

What is still driving market sentiment is the lack of a turnaround in Nike's performance in China.

In the fourth fiscal quarter, Nike's Greater China revenue was $1.3B, down 12% year-over-year, or down 17% on a currency-neutral basis, with single-quarter revenue hitting a low for the nearly two fiscal years.

For the full year, Greater China revenue was $5.85B, down 11% year-over-year, or down 13% on a currency-neutral basis, continuing to weaken on top of the decline in the previous fiscal year.

The pressure in Greater China is not just a regional data point in the financial report; it is the hardest part to fix in Nike's global reset process.

On the earnings call, CEO Elliott Hill referred to Greater China as Nike's "key long-term growth market" and stated that the company is executing a "comprehensive reset" in China: returning to sports and innovation, creating products more locally, building an offensive system closer to the regional market, while rethinking market operations, evaluating new growth paths with partners, making the brand more premium and closer to local culture, and operating at the speed of Chinese consumers.

Behind this rhetoric are the persistent old problems Nike China has faced over the past two years: insufficient product heat, high online discounts, inventory and channel health under pressure, and intensified competition from local sports brands.

It's not that Nike hasn't seen some local improvements.

CFO Matthew Friend said on the earnings call that Greater China implemented several adjustments in the quarter: sell-through rates improved sequentially, average retail discounts decreased; after more aggressively reducing promotions over the past two quarters, full-price realization rates in digital channels are recovering. At the same time, both inventory value and unit count in Greater China achieved double-digit declines.

But these improvements are not enough to offset the overall decline.

In the fourth fiscal quarter, Greater China Nike Direct fell 14%, with Nike Digital down 25% and Nike-owned stores down 9%; wholesale channel down 19%; EBIT (reported basis, excluding one-time items) down 20%.

The company also expects that in the near term, Greater China revenue trends will be broadly consistent with recent performance.

This means that for the foreseeable future, Nike China's recovery remains in the phase of clearing inventory, reducing discounts, and resetting key stores, and has not yet entered a stable growth recovery cycle.

Channel anxiety in the Chinese market has already spilled over into the capital markets ahead of the earnings report.

In late June, the market spread rumors that Nike might cancel the authorization for online tier-1 distributors in mainland China starting January 2027. However, this news was quickly clarified by Nike's main distributor in China, Top Sports, through an announcement, and Nike also denied it on the earnings call.

The reason the rumor attracted widespread attention is that it hit a sensitive area in Nike China's channel structure.

In the past few years, Nike had placed more emphasis on DTC and digital direct sales, but as direct sales have come under pressure and wholesale partners have regained importance, the company is repairing relationships with distributors and retailers globally.

In the fourth fiscal quarter of fiscal 2026, Nike's global wholesale revenue was $6.6 billion, up 4% year-over-year; Nike Direct revenue was $4.1 billion, down 7% year-over-year, with Nike Brand Digital down 12%.

After returning, Elliott Hill had proposed "Win Now" and "Sport Offense," focusing on sports, product innovation, wholesale partners, and key markets.

But in the latest earnings call, he admitted that the overall results "haven't reached the level they should be," and that the sell-through of Nike Sportswear and Jordan Streetwear still faces challenges, affecting current discounts and future orders.

This is also a microcosm of Nike's China problem. Chinese consumers are not stopping buying sports shoes and apparel; they have more choices, a faster pace, and are more price-sensitive.

Local brands are continuously investing in segmented sports scenarios such as running, outdoor, basketball, and training, while e-commerce platforms and content channels further amplify price comparisons and the speed of new product dissemination.

Nike's model of relying on global hits, classic shoes, and brand halo for premiums has been more clearly weakened in the Chinese market.

The capital market is not forgiving of this. After Nike's earnings report, its stock price fell about 4% in after-hours trading, and it has fallen about 35% year-to-date; investors are still waiting for clearer results from Hill's nearly two-year recovery plan.

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