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Nike's China problem remains unsolved this season.

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

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

On the surface, Nike's profit side showed significant recovery, with fourth-quarter net profit of $1.1 billion, a sharp increase of 407% year-over-year, and diluted earnings per share of $0.72. However, this performance was largely due to a one-time gain from 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 continues to drive 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 $1.297 billion, down 12% year-over-year, or 17% on a currency-neutral basis, with quarterly revenue falling to a low point in nearly two fiscal years.

On an annual basis, Greater China revenue was $5.847 billion, down 11% year-over-year, or 13% on a currency-neutral basis, continuing to weaken from 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 most difficult part of Nike's global reset to repair.

In 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 regional markets, 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 of Nike China over the past two years: insufficient product heat, high online discounts, pressure on inventory and channel health, and intensified competition from local sports brands.

Nike is not unaware of some local improvements.

CFO Matthew Friend said in the earnings call that Greater China implemented several adjustments in the quarter: sell-through rates improved month-over-month, average retail discounts decreased; after more aggressive reduction in promotions over the past two quarters, the digital channel's full-price realization rate is recovering. At the same time, both the inventory value and inventory units in Greater China achieved double-digit declines.

However, these improvements are not yet enough to offset the overall decline.

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

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

This means that for the coming period, Nike's recovery in China will still be in the phase of clearing inventory, reducing discounts, and reorganizing key stores, and has not yet entered a cycle of stable growth recovery.

The channel anxiety in the Chinese market has already spilled over into the capital markets before the financial report.

In late June, the market circulated rumors that Nike might cancel the authorization for first-tier online 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 in the earnings call.

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

In the past few years, Nike emphasized DTC and digital direct sales, but as direct sales faced pressure and wholesale partners regained importance, the company is globally repairing relationships with distributors and retailers.

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 Elliott Hill's return, he proposed "Win Now" and "Sport Offense," focusing on sports, product innovation, wholesale partners, and key markets.

However, in the latest earnings call, he admitted that the company's overall results have "not yet reached the expected level," and that 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, faster pace, and greater price sensitivity.

Local brands continue to increase investment in segmented sports scenarios such as running, outdoor, basketball, and training, and e-commerce platforms and content channels further amplify price comparisons and the speed of new product dissemination.

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

The capital market is not forgiving of this. After the Nike financial report was released, the stock price fell about 4% in after-hours trading, and the cumulative decline this year is about 35%; investors are still waiting for clearer results from Hill's recovery plan over the past two years.

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