Nike Surprises with Strong Q1 Earnings Despite China Sales Slump
Nike has reported a strong start to the year, with earnings per share of 49 cents surpassing estimates of 27 cents. The sportswear giant's shares rose 3.4% in extended trading following the news.
The company's revenue for the first quarter rose 1% year-over-year to $11.72 billion, defying expectations of a 5.1% decline. Nike's wholesale revenues also saw a 5% increase on a currency-neutral basis, driven by the turnaround plan initiated by CEO Elliott Hill in 2021. Hill has been refocusing the brand on core sports and developing high-quality products.
However, challenges persist. China, Nike's third-largest market, continues to struggle with sales falling for the fifth consecutive quarter. The company expects tariffs to cost about $1.5 billion in fiscal 2026, up from the previously expected $1 billion. Nike forecasts a low-single-digit decline in second-quarter revenue, compared to estimates of a 3.1% drop. The company's gross margin decreased by 320 basis points to 42.2% in the first quarter.
Despite facing headwinds in China and increased tariff costs, Nike has delivered better-than-expected earnings and revenue. The company's wholesale business is expected to grow in fiscal 2026, although the direct-to-consumer segment is not anticipated to return to growth until then. Nike's shares reacted positively to the news, reflecting investor confidence in the company's turnaround efforts under CEO Elliott Hill.
