Nike Inc. reported a 4% decline in quarterly revenue and a 26% drop in sales within Greater China, prompting the company to announce a restructuring plan that it says will save $2.5 billion through fiscal 2031. The financial results, which drove the stock price down, highlighted the severe challenges the company faces against entrenched local competitors in the world's largest consumer market.
In the most recent quarter, total revenue fell to $11.2 billion, while net income decreased 2% to $712 million. The decline was most pronounced in the Greater China region, where revenue plummeted to $1.18 billion. Nike management cited the weakness in China as a primary reason for its decision to "downsize" operations. The planned restructuring program is expected to result in job cuts, although the company stated it is taking deliberate actions to strengthen its businesses for the long term.
Chief Executive Elliott Hill wrote to employees that the company is working to improve its position in key markets. However, Hill did not mention that global rivals such as Adidas and Puma, as well as smaller brands like On and Hoka, are also attempting to improve their fortunes in China. Large local companies, specifically Anta Sports, Li-Ning, and Xtep, have established deep roots in the domestic market and represent significant hurdles for Nike.
The struggle for Western brands in China is not limited to athletic wear. Starbucks Corp. recently sold a majority interest in its China operations to Boyu Capital, a local private equity firm, for $4 billion. Other major US companies, including Walmart Inc. and McDonald's Corp., have faced similar pressures from local competitors, leading them to rarely highlight their China-specific financial figures in public communications.
Investors have reacted negatively to Nike's continued difficulties. This year, Nike's stock is down 22%, while the S&P 500 index is up 12%. Over the last five years, Nike shares have fallen 76%, whereas the S&P 500 has risen 75%. Without a recovery in China, where local rivals have tightened their grip, the brand's trajectory may be irreversible. The Air Jordan brand, which first went on sale in 1984, is cited as evidence of a broader disintegration of the company's market dominance.